[Federal Register Volume 65, Number 245 (Wednesday, December 20, 2000)]
[Rules and Regulations]
[Pages 80110-80254]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 00-32088]



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Part III





Department of Labor





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Employment and Training Administration



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20 CFR Parts 655 and 656



Temporary Employment in the United States of Nonimmigrants under H-1B 
Visas; Final Rule

  Federal Register / Vol. 65, No. 245 / Wednesday, December 20, 2000 / 
Rules and Regulations  

[[Page 80110]]


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DEPARTMENT OF LABOR

Employment and Training Administration

20 CFR Parts 655 and 656

RIN 1215-AB09


Labor Condition Applications and Requirements for Employers Using 
Nonimmigrants on H-1B Visas in Specialty Occupations and as Fashion 
Models; Labor Certification Process for Permanent Employment of Aliens 
in the United States

AGENCY: Employment and Training Administration, Labor, in concurrence 
with the Wage and Hour Division, Employment Standards Administration, 
Labor.

ACTION: Interim final rule; request for comments.

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SUMMARY: This document contains interim final regulations implementing 
recent legislation and clarifying existing Departmental rules relating 
to the temporary employment in the United States of nonimmigrants under 
H-1B visas. On January 5, 1999, the Department published a notice of 
proposed rulemaking (64 FR 628) seeking public comment on issues to be 
addressed in regulations to implement changes made to the Immigration 
and Nationality Act (INA) by the American Competitiveness and Workforce 
Improvement Act of 1998 (ACWIA). In particular, the ACWIA requires H-
1B-dependent employers and willful violators to comply with certain 
additional attestations regarding anti-displacement and recruitment 
obligations. The Department also sought further comment on certain 
proposals which were previously published for comment as a Proposed 
Rule on October 31, 1995 (60 FR 55339), and on certain interpretations 
of the statutes and its existing regulations which the Department 
proposed to incorporate in the regulations.

DATES: Effective Dates: These regulations are effective January 19, 
2001, with the exception of Secs. 655.731(a)(2) and 656.40, (c) and (d) 
which are effective December 20, 2000.
    Applicabililty Date: Sections 655.731(a)(2) and 656.40 apply 
retroactively to any prevailing wage determinations thereunder which 
were not final as of October 21, 1998. Sections 655.720 and 655.721 are 
applicable to Labor Condition Applications filed on or after February 
5, 2001.
    Comment Date: Written comments on these regulations and issues 
raised in the preamble may be submitted by February 20, 2001, with the 
exception of any comments on Form WH-4, which must be submitted by 
January 19, 2001.

ADDRESSES: Submit written comments concerning Part 655 to Deputy 
Administrator, Wage and Hour Division, ATTN: Immigration Team, U.S. 
Department of Labor, Room S-3502, 200 Constitution Avenue, N.W., 
Washington, D.C. 20210. Commenters who wish to receive notification of 
receipt of comments are requested to include a self-addressed, stamped 
post card. Comments may also be transmitted by facsimile (``FAX'') 
machine to (202) 693-1432. This is not a toll-free number.
    Submit written comments concerning Part 656 to the Assistant 
Secretary for Employment and Training, ATTN: Division of Foreign Labor 
Certifications, U.S. Employment Service, Employment and Training 
Administration, Department of Labor, Room C-4318, 200 Constitution 
Avenue, NW., Washington, DC 20210. Commenters who wish to receive 
notification of receipt of comments are requested to include a self-
addressed, stamped post card. Comments may also be transmitted by 
facsimile (``FAX'') machine to (202) 693-2769. This is not a toll-free 
number.

FOR FURTHER INFORMATION CONTACT: Michael Ginley, Director, Office of 
Enforcement Policy, Wage and Hour Division, Employment Standards 
Administration, Department of Labor, Room S-3510, 200 Constitution 
Avenue, NW., Washington, DC 20210. Telephone: (202) 693-0745 (this is 
not a toll-free number).
    James Norris, Chief, Division of Foreign Labor Certifications, U.S. 
Employment Service, Employment and Training Administration, Department 
of Labor, Room C-4318, 200 Constitution Avenue, NW., Washington, DC 
20210. Telephone: (202) 693-3010 (this is not a toll-free number).

SUPPLEMENTARY INFORMATION:

I. Paperwork Reduction Act

    The H-1B nonimmigrant program is a voluntary program that allows 
employers to temporarily import and employ nonimmigrants admitted under 
H-1B visas to fill specialized jobs not filled by U.S. workers. 
(Immigration and Nationality Act (INA), 8 U.S.C. 1101(a)(15)(H)(I)(b), 
1182(n), 1184(c)). The statute, among other things, requires that an 
employer pay an H-1B worker the higher of the actual wage or the 
prevailing wage, to protect U.S. workers' wages and eliminate any 
economic incentive or advantage in hiring temporary foreign workers.
    Under the Immigration and Nationality Act (INA), as amended by the 
Immigration Act of 1990 (Act), and as amended by the Miscellaneous and 
Technical Immigration and Naturalization Amendments of 1991, an 
employer seeking to employ an alien in a specialty occupation or as a 
fashion model of distinguished merit and ability on an H-1B visa is 
required to file a labor condition application with and receive 
certification from DOL before the Immigration and Naturalization 
Service (INS) may approve an H-1B petition. The labor condition 
application process is administered by ETA; complaints and 
investigations regarding labor condition applications are the 
responsibility of ESA.
    On January 5, 1999, the Department of Labor (DOL) published a 
proposed rule which would implement statutory changes in the H-1B 
program made to the INA by the American Competitiveness and Workforce 
Improvement Act of 1998 (ACWIA) (Title IV, Pub. L. 105-277). The ACWIA, 
as amended by the American Competitiveness in the Twenty-First Century 
Act of 2000 (Pub. L. 106-313), among other things, temporarily (until 
October 2003) increases the maximum number of H-1B visas permitted each 
year; temporarily requires new non-displacement (layoff) and 
recruitment attestations by ``H-1B dependent'' employers (as defined by 
the ACWIA) and willfully violating employers; and requires employers to 
offer the same fringe benefits to H-1B workers on the same basis as it 
offers fringe benefits to U.S. workers. The public was invited to 
comment on the proposed rule, including the information collection 
requirements noted below. In addition, pursuant to the Paperwork 
Reduction Act of 1990, DOL submitted a paperwork package to the Office 
of Management and Budget (OMB), requesting review and approval of the 
information collection requirements included in the proposed rule.
    Since publication of the NPRM, additional amendments to the H-1B 
provisions were enacted by the American Competitiveness in the Twenty-
first Century Act of 2000 (Pub. L. 106-313, 114 Stat. 1251, October 17, 
2000), the Immigration and Nationality Act--Amendments (Pub. L. 106-
311, 114 Stat. 1247, October 17, 2000), and section 401 of the Visa 
Waiver Permanent Program Act (Pub. L. 106-396, 114 Stat. 1637, October 
30, 2000) (collectively, the October 2000 Amendments). Most pertinent 
to these regulations were provisions that raised the ceiling on the 
number of H-1B visas that may be issued and extended the

[[Page 80111]]

period of effectiveness of the additional attestations applicable only 
to H-1B-dependent employers and willful violators.
    Comments were received from members of Congress, OMB, law firms, 
information technology industry associations, other industry 
associations, information technology firms, research firms, other 
employers of H-1B workers, Federal agencies and individuals. Commenters 
questioned DOL authority under the ACWIA and/or the Immigration and 
Nationality Act to impose the paperwork requirements contained in the 
proposed rule. Further, commenters questioned the DOL burden estimates 
for these information collections, indicating that the estimates were 
much too low. Many commenters contended DOL should only require the 
production of records in an investigation context. One commenter 
suggested for clarity that DOL provide a check list for H-1B employers 
indicating which records must be kept, which records are required by 
other statutes or regulations and where these records must be kept.
    Many commenters have fundamental misunderstandings of the nature of 
the reporting and disclosure requirements proposed in the NPRM. The 
Department has made every effort in the NPRM and in the Interim Final 
Rule to limit recordkeeping requirements to documents which are 
necessary for the Department to ensure compliance, and to documents 
which are already required by other statutes and regulations or would 
ordinarily be kept by a prudent businessperson. As a general matter, 
when reviewing the recordkeeping and disclosure obligations set forth 
in the regulations, employers should be aware that the regulations 
distinguish between a requirement to ``preserve'' or ``retain'' records 
if they otherwise exist, and a requirement to ``maintain'' records 
whether or not they already exist. A requirement that employers retain, 
for example, ``any'' documentation on a particular subject requires 
only that any such documents be retained if they otherwise exist, but 
does not require creation of any documents. In addition, the Department 
points out that where the regulations do not explicitly require public 
access, the records may be kept in the employer's files in any manner 
desired; they do not need to be segregated by labor condition 
application (LCA) or establishment and do not need to be segregated 
from the records of non-H-1B workers, provided they are promptly made 
available to the Department upon request in the conduct of an 
investigation. The Department considers it important to require that 
such records be maintained, as in other enforcement programs, so that 
in the event of an investigation, the Department is able to determine 
compliance or, in the event of violations, to determine the nature and 
extent of the violations. This can only be accomplished with adequate, 
accurate records since it is only the employer who is in a position to 
know and produce the most probative underlying facts. See Anderson v. 
Mt. Clemens Pottery Co., 328 U.S. 680, 687 (1946).
    In addition, in the regulations, the Department has limited the 
documents that must be disclosed to the public to those which the 
Department has concluded are necessary for a member of the public to be 
able to determine the employer's obligations and the general contours 
of how it will comply with its attestation obligations. The regulations 
on public access files do not require that there be a separate public 
access file for each LCA or for each worker. Thus, for example, an 
employer might choose to keep a single public access file with one copy 
of each of the required documents which are applicable to all LCAs 
(such as the description of the employer's pay system), and separately 
clip together those documents which are specific to each LCA.
    Nothing in the ACWIA suggests that it intends to deny the 
Department the usual authority to require recordkeeping as a means of 
ensuring compliance with an employer's statutory obligations. To the 
contrary, Section 212(n)(1) specifically requires employers to make the 
LCA ``and such accompanying documents as are necessary'' available for 
public examination. The Department believes that this provision clearly 
permits the Department to determine what documents must be created or 
retained by employers to support the LCA. In the absence of such 
records, the Department is unable to ascertain whether an employer in 
fact is in compliance or the extent of violations.
    In an effort to fully educate the public regarding the H-1B program 
and its requirements (including paperwork), DOL intends to prepare and 
make available pamphlets, fact sheets and a small business compliance 
guide. Further compliance assistance material will be made available on 
the DOL website. See Section IV.B, below, for an extensive discussion 
of this public outreach effort. The following is a brief discussion of 
the paperwork requirements contained in the proposed rule, the public 
comments on those requirements, the DOL response and the paperwork 
requirements imposed by this interim final rule. A much more extensive 
discussion of the issues, including the paperwork requirements, is 
contained in Section IV of the preamble.

A. Labor Condition Application (Sec. 655.700)

    The process of protecting U.S. workers begins with a requirement 
that employers file a labor condition application (LCA) (Form ETA 9035) 
with the Department. In this application the employer is required to 
attest: (1) That it will pay H-1B aliens prevailing wages or actual 
wages, whichever are greater--including, pursuant to the ACWIA, the 
requirement to pay for certain nonproductive time and to provide 
benefits on the same basis as they are provided to U.S. workers; (2) 
that it will provide working conditions that will not adversely affect 
the working conditions of U.S. workers similarly employed; (3) that 
there is no strike or lockout at the place of employment; and (4) that 
it has publicly notified the bargaining representative or, if there is 
no bargaining representative, the employees, by posting at the place of 
employment or by electronic notification--and will provide copies of 
the LCA to each H-1B nonimmigrant employed under the LCA. In addition, 
the employer must provide the information required in the application 
about the number of aliens sought, occupational classification, wage 
rate, the prevailing wage rate and the source of the wage rate, and 
period of employment. Pursuant to the ACWIA, additional attestation 
requirements become applicable to H-1B-dependent employers and willful 
violators after promulgation of these regulations. This form, currently 
approved by OMB under OMB No. 1205-0310, was revised in the NPRM to 
identify H-1B dependent employers and provide for their attestation to 
the new requirements. The ACWIA increased the number of H-1B 
nonimmigrants from 65,000 to 115,000 in fiscal years 1999 and 2000 and 
to 107,500 in fiscal year 2002. Besides the increase in LCAs filed for 
these additional workers, by regulation H-1B-dependent employers are 
required to file new LCAs if they wish to file petitions for new H-1B 
nonimmigrants or to seek extensions of status for existing workers. The 
Department estimated in the proposal that 249,500 LCAs are filed 
annually by 50,000 H-1B employers (dependent and nondependent). The 
only added LCA burden proposed in the NPRM was for H-1B-dependent 
employers and willful violators to indicate on the LCA their status and 
their agreement to the

[[Page 80112]]

additional attestation requirements. (The time required for an 
estimated 50 H-1B employers to make the mathematical calculation to 
determine if they must make the additional attestations required of an 
H-1B employer is separately set out in C. of this section, below.) 
Since it was estimated that only 50 H-1B employers will find it 
necessary to make this calculation, out of a total of 50,000 H-1B 
employers, the estimate of time necessary to complete the form remained 
at 1 hour. Total annual burden was estimated at 249,500 hours.
    Since promulgation of the NPRM, the 2000 Amendments to the INA 
further increase the ceiling on the number of H-1B visas that may be 
issued annually for 2001, 2002 and 2003, to 195,000 annually, with an 
additional unspecified number who may be admitted if they will be 
employed by a school, a related non-profit entity, a State or local 
government research organization, or a nonprofit research organization.
    Commenters generally objected to the one hour estimate for 
completing the LCA, pointing out that the revised LCA is four pages 
long, whereas the current LCA is only one page for an estimated burden 
of one and one-quarter hour per LCA.
    OMB suggested asked whether the conditions in a, b and c in section 
8 capture the requirements for H-1B dependent employers. They also 
suggested amending the end of the sentence following the second box to 
read ``* * * unless the exemption requirement in the NOTE below is 
met.''
    A commenter stated that DOL had failed to consider that many 
employers will now be forced to file two LCAs where previously they 
only filed one. Several of its member employers who previously filed an 
LCA for multiple openings indicated that they may file separate LCAs 
for each opening rather than take the risk that of INS making a 
determination that one H-1B nonimmigrant is not exempt, thus 
invalidating the entire LCA.
    As discussed in Section IV.B.4 below, the ETA Form 9035 has been 
amended to provide that every employer is required to indicate whether 
it is or is not H-1B-dependent or a willful violator. Since all 
employers are required to determine whether or not they are H-1B 
dependent--although for most employers, as discussed below, their 
status will be readily apparent and no actual computation will be 
necessary--the additional box for non-dependent employers should 
require no additional time. There is no other information required 
which is not contained on the current form other than to check a box 
indicating the agreement of H-1B-dependent employers and willful 
violators to the additional attestation requirements. The longer form 
is not due to the requirement to furnish additional information, but to 
the new format required for the FAXback, which is designed to decrease 
significantly the processing time. See Section IV.5, below. The 
Department also notes that the 1\1/4\ hour estimate on the current ETA 
Form 9035 includes the 15 minutes estimated to file a complaint with 
the Wage and Hour Division
    Upon review, the Department sees no reason to change its estimate 
of an average of one hour per form, including both reading the 
instructions and filling out the form (estimated to take no more than 
one-half hour per form), as well as taking the actions that are 
subsumed in filling out the form (obtain the prevailing wage and 
providing notice). Based upon current data, and considering the 
regulatory change deleting the necessity for filing a new LCA when an 
employer's corporate identity changes (see B. of this section, below) 
as well as the requirement that H-1B-dependent employers with current 
LCAs file new LCAs if they wish to file new H-1B petitions or requests 
for extension of status, DOL estimates that 637,000 LCAs will be 
submitted annually by 63,500 H-1B employers (dependent and 
nondependent). Total annual burden for the LCA is estimated to be 
637,000 hours (637,000 LCAs  x  1 hour).

B. Documentation of Corporate Identity (Sec. 655.760)

    Currently, the regulatory requirement is that a new LCA must be 
filed when an employer's corporate identity changes and a new Employer 
Identification Number (EIN) is obtained. Under the proposed rule, an 
employer who merely changes corporate identity through acquisition or 
spin-off could merely document the change in the public file (including 
an express acknowledgment of all LCA obligations on the part of the 
successor entity), provided it satisfied the Internal Revenue Code 
definition of a single employer. The proposed regulation was designed 
to eliminate a burden on businesses to file a new LCA, while at the 
same time ensuring that the public is aware of the changes and that the 
employer will continue to follow its LCA obligations. It was estimated 
in the proposal that 500 H-1B employers would be required to file the 
subject documentation annually. It was estimated that the recording and 
filing of each such document would take 15 minutes for a total annual 
burden of 125 hours.
    One commenter asked how DOL's rulemaking affected the INS 
interpretation that any ``material change in employment'' necessitates 
the filing of an amended petition. Another commenter asked what opinion 
an employer is to follow when current DOL opinion is that any change to 
an approved LCA requires an amendment to the H-1B petition and the view 
of INS is that a change in company name or EIN does not require a new 
LCA, just that the change be documented at the time of amendment or 
extension. Another commenter stated that the burden for this 
requirement is significantly higher than DOL estimated.
    Upon reconsideration, DOL's Interim Final Rule provides that a new 
LCA will not be required merely because a corporate reorganization 
results in a change of corporate identity, regardless of whether there 
is a change in the EIN and regardless of whether the IRS definition of 
single employer is satisfied, provided that the successor entity, prior 
to the continued employment of the H-1B nonimmigrant, agrees to assume 
the predecessor entity's obligations and liabilities under the LCA. The 
agreement to comply with the LCA for the future and to any liability of 
the predecessor under the LCA must be documented with a memorandum in 
the public access file.
    With these changes, and based on the Department's experience, it is 
now estimated that 1000 H-1B employers (an increase from the 500 
employers estimated in the NPRM) will be required to file the 
documentation annually and that the recording and filing of each such 
document will take approximately 30 minutes for a total annual burden 
of 500 hours. The Department also estimates that employers who file 
this memorandum will file 10,000 fewer LCAs, for a net saving of 9,500 
hours.
    INS requirements for the filing of an amended petition are separate 
from DOL requirements for the filing of LCAs.

C. Determination of H-1B Dependency (Sec. 655.736)

    An H-1B employer must calculate the ratio between its H-1B workers 
and the number of full-time equivalent employees (FTEs) to determine 
whether it meets the statutory definition of an H-1B-dependent employer 
(8 U.S.C. 1182 (n)(3)(A)). The NPRM provided that when it is a close 
question, the determination would ordinarily be made by examination of 
an employer's quarterly tax statement and last payroll (or last quarter 
of payrolls if more

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representative) or other evidence as to average hours worked by part-
time employees to aggregate their hours into FTEs, together with a 
count of the number of workers under H-1B petitions. Documentation of 
this determination would be required where non-dependent status is not 
readily apparent and a mathematical determination must be made. A copy 
of this determination would be placed in the public disclosure file. In 
addition, if an employer changed from dependent to non-dependent 
status, or vice-versa, a simple statement of the change in status would 
be placed in the public disclosure file. The NPRM explained that 
documentation of a determination of H-1B dependency where it is a close 
question is necessary to determine employer compliance with H-1B 
requirements, and to advise the public of an employer's status. It was 
estimated in the proposal that approximately 50 H-1B employers would 
need to make the determination with 25 employers who are found not to 
be dependent employers would be required to document this determination 
annually. The making and documentation of each such determination was 
estimated to take approximately 15 minutes, and occur at least twice 
annually for a total annual burden of 12.5 hours.
    Several commenters expressed the view that the DOL burden estimate 
for this requirement was severely underestimated. They remarked that 
large employers who hire H-1B employees will have to create systems of 
verification of H-1B dependency and that the determination will be 
difficult where employees are located in multiple locations and 
departments and the data needed to make the determination are 
maintained in different databases. Some commenters questioned the 
connection DOL made between the use of blanket LCAs and the likelihood 
of H-1B dependency and how frequently the determination would need to 
be made. Some also commented that it appeared that whenever the 
determination is made, a copy of the calculation must be placed in the 
public access file, making it a requirement for all H-1B employers, not 
just those who are borderline H-1B dependent. OMB commented that the 
15-minute burden for the dependency determination seemed low and asked 
if the estimate just includes the assurance (how it is written) or does 
it also include documentation of the assurance.
    Having taken into consideration all of the comments pertaining to 
the determination of dependency status, DOL has decided modification 
these requirements is appropriate to achieve the purposes of the ACWIA 
and avoid unnecessary burden on employers. First, the Interim Final 
Rule provides that all employers must retain copies of the I-129 
petitions or requests for extensions of status filed with INS. These 
documents are critical to several provisions in the regulations, 
including in particular the determination of dependency and the number 
of hours that must be compensated if employees are ``benched.'' The 
Department believes that prudent businessmen would retain copies of 
these documents in any event. (See also the discussion in D. of this 
section, below.)
    The Interim Final Rule also significantly reduces the burden to 
employers in making the computations of dependency. The Rule will 
permit employers to use a ``snap shot'' test to determine if dependency 
status is readily apparent and requires a full computation only if the 
number of H-1B workers exceeds 15 percent of the total number of full-
time workers of the employer. Furthermore, the Rule provides employers 
an option of considering all part-time workers to be one-half FTE, 
rather than make the full computation. If the full computation (where 
required because the dependency status is not readily apparent) 
indicates that the employer is not H-1B dependent, the employer must 
retain a copy of this computation. Further, the employer must retain a 
copy of the full computation in specified circumstances which the 
Department believes will very rarely occur. The full computation must 
be maintained if the employer changes status from dependent to non-
dependent. If the employer uses the Internal Revenue Code single 
employer test to determine dependency, it must maintain records 
documenting what entities are included in the single employer, as well 
as the computation performed, showing the number of workers employed by 
each entity who is included in the calculation. Finally, if the 
employer includes workers who do not appear on the payroll, a record of 
the computation must be kept. The Department has concluded that the 
computations or summary of the computations need not be kept in the 
public access file.
    Although DOL has made several changes to simplify the determination 
of dependency status and its documentation, upon reconsideration DOL 
has increased its estimate of burden from 15 to 30 minutes, thus 
increasing the annual burden for an estimated 25 employers who must 
make and document such calculations twice annually from 12.5 to 25 
hours. The Department also estimates that no more than 5 percent of 
employers will be required to retain copies of H-1B petitions and 
extensions who do not currently retain these documents, for an average 
of 3 minutes per petition, and a total of 159 hours (3,175 employers 
x  3 minutes  60). Total annual burden for this item is 
estimated to be 184 hours.

D. List of Exempt H-1B Employees in Public Access File 
(Sec. 655.737(a)(1))

    The ACWIA provisions regarding non-displacement and recruitment of 
U.S. workers do not apply where the LCA is used only for petitions for 
exempt H-1B workers. The NPRM provided that where the INS determines a 
worker is exempt, employers would be required to maintain a copy of 
such documentation in the public access file. Determinations as to 
whether or not H-1B workers meet the education requirements to be 
classified as exempt H-1B nonimmigrants would be made initially by the 
INS in the course of adjudicating the petitions filed on behalf of H-1B 
nonimmigrants by dependent employers. In the event of an investigation, 
it was anticipated that considerable weight would be given to the INS 
determination that H-1B nonimmigrants were exempt, based on the 
educational attainments of the workers, since INS has considerable 
experience in evaluating the educational qualifications of aliens. 
Retention of copies of such determinations would aid DOL in determining 
compliance with the H-1B requirements and provide the public with 
notice as well. It was estimated in the proposal that 28,125 such 
documents would need to be filed annually. Each such filing would take 
approximately one minute for an annual burden of approximately 468.8 
hours.
    One commenter indicated that the one minute to physically complete 
the form may be correct but that the estimate ignores the analysis and 
review required to determine if they are exempt. Another commenter 
asked what documentation must be copied and maintained in the file, 
i.e., would INS issue a separate determination or would Form I-797, 
Notice of Approval of H-1B Petition suffice? They also believed it was 
unclear how DOL estimated only 28,125 documents would be filed annually 
when the number of H-1B petition approvals for the current fiscal year 
is 115,000.
    On further consideration, because of privacy considerations, DOL 
has concluded that the H-1B petitions with the INS determinations of 
workers' exempt status need not be included in the public access file. 
However, DOL

[[Page 80114]]

believes the public should know which workers are not covered by the 
new attestation elements so they can challenge a determination of 
exempt status where they believe the basis for the exemption is 
invalid. Therefore, under the interim final rule employers will be 
required to include in their public access file a list of the H-1B 
nonimmigrants supported by any LCA attesting that it will be used only 
for exempt workers, or in the alternative, a statement that the 
employer employs only exempt H-1B workers. DOL estimates that each list 
or statement will take approximately 15 minutes and that 200 H-1B 
employers will prepare one such list or statement annually for a total 
burden of 50 hours.

E. Record of Assurance of Non-displacement of U.S. Workers at Second 
Employer's Worksite (Sec. 655.738(e))

    Section 212(n)(F)(ii) of the INA, 8 U.S.C. 1182(n)(F)(ii), 
prohibits an H-1B-dependent employer from placing H-1B nonimmigrant 
with another employer unless the dependent employer makes a bona fide 
inquiry as to the secondary employer's intent regarding displacement of 
U.S. workers by H-1B workers. The proposed regulation would require an 
employer seeking to place an H-1B nonimmigrant with another employer to 
secure and retain either a written assurance from the second employer, 
a contemporaneous written record of the second employer's oral 
statements regarding non-displacement, or a prohibition in the contract 
between the H-1B employer and the second employer. Pursuant to the 
ACWIA, an H-1B employer may be debarred for a secondary displacement 
``only if the Secretary of Labor found that such placing employer * * * 
knew or had reason to know of such displacement at the time of the 
placement of the nonimmigrant with the other employer.'' Congress 
clearly intended that the employer make a reasonable inquiry and give 
due regard to available information. In order to assure that the 
purposes of the statute are achieved, the Department developed a 
regulatory provision to require that the H-1B employer make a 
reasonable effort to inquire about potential secondary displacement and 
to document those inquiries. It was estimated that approximately 150 
employers would place H-1B nonimmigrants with secondary employers where 
assurances are required. It was estimated that each such assurance will 
take approximately 5 minutes and each such employer would obtain such 
assurances 5 times annually for an annual burden of 62.5 hours.
    Commenters stated that DOL grossly underestimated the amount of 
time necessary to persuade and obtain from the secondary employer the 
necessary assurances, create a verification form or revise a contract 
and the annual frequency of the assurances. Further, some commenters 
felt that DOL had failed to consider the additional burden on the 
secondary employer to document their compliance with the assurance.
    The paperwork burden estimate, properly, does not include the time 
necessary to persuade a secondary employer to provide such an assurance 
but does include the development of the verification form or contract 
clause and its execution. DOL believes that once the form or contract 
clause is created, this form or contract clause will be used uniformly 
for subsequent assurances making the average burden per occurrence 
minimal. There is no burden on the secondary employer to document its 
compliance with the assurance, since it is solely the responsibility of 
the primary H-1B employer to comply with the attestation that no U.S. 
worker will be displaced by an H-1B worker. DOL estimates an average 
burden of 10 minutes per attestation or statement, and that 150 H-1B 
employers will document such assurance 5 times annually, for a total 
annual burden of 125 hours.

F. Offers of Employment to Displaced U.S. Workers (Sec. 655.738(e))

    The ACWIA prohibits H-1B dependent employers and willful violators 
from hiring H-1B nonimmigrants if their doing so would displace similar 
U.S. workers from an essentially equivalent job in the same area of 
employment. The proposed regulations would require H-1B-dependent 
employers to keep certain documentation with respect to each former 
worker in the same locality and same occupation as any H-1B worker who 
left its employ in the period from 90 days before to 90 days after an 
employer's petition for an H-1B worker. For all such employees, the 
Department proposed that covered H-1B employers maintain the last-known 
mailing address, occupational title and job description, any 
documentation concerning the employee's experience and qualifications, 
and principal assignments. Further, the employer would be required to 
keep all documents concerning the departure of such employees and the 
terms of any offers of similar employment to such U.S. workers and 
responses to those offers. These records are necessary for the 
Department to determine whether the H-1B employer has displaced similar 
U.S. workers with H-1B nonimmigrants. The Department stated that no 
records need be created to comply with these requirements, since the 
Equal Employment Opportunity Commission (EEOC) already requires under 
its regulations that the records described above be maintained.
    Commenters stated that they were unaware of the EEOC regulation 
that required this documentation and requested that DOL recite rather 
than just refer to the EEOC regulations.
    As discussed in Section IV.F.8 below, commenters are generally 
correct that the EEOC regulation cited in the NPRM, 29 CFR 1620.14, 
does not establish a general requirement that employers create the 
records encompassed by the Department's displacement proposal. Rather, 
it requires an employer to preserve all personnel or employment records 
which the employer ``made or kept''. Furthermore, EEOC requires the 
preservation of the same or similar records under other statutes it 
administers, such as the Age Discrimination in Employment Act (ADEA). 
Under this Interim Final Regulation, DOL is not requiring employers to 
create any documents other than basic payroll information, with one 
noted exception. If the employer offers the U.S. worker another 
employment opportunity, and does not otherwise do so in writing, by the 
provisions of section 655.738(e)(1) of these regulations, the employer 
must document and retain the offer and the response to such offer.
    It is estimated that 10 H-1B employers will make such offers of 
employment 5 times annually (50) and that 5 of those offers and 
responses would not otherwise be committed to writing without this 
paperwork requirement. Each such documentation is estimated to take 30 
minutes for a total annual burden of 2.5 hours.

G. Documentation of U.S. Worker Recruitment (Sec. 655.739(i)

    Pursuant to the ACWIA, H-1B-dependent employers are required to 
make good faith efforts to recruit U.S. workers before hiring H-1B 
workers. Under the proposed regulations, H-1B-dependent employers would 
be required to retain documentation of the recruiting methods used, 
including the places and dates of the advertisements and postings or 
other recruitment method used, the content of the advertisements or 
postings, and the compensation terms. Further, the employer would be 
required to retain any documentation concerning consideration of 
applications of U.S. workers, such as copies of applications

[[Page 80115]]

and related documents, rating forms, job offers, etc. The proposed rule 
also would require the employer to place either documentation or a 
simple list of the places and dates of the advertisements and postings 
of other recruitment methods used. Comments were requested regarding 
how employers should determine industry-wide standards and make this 
determination available for public disclosure. The documentation noted 
above is necessary for the Department of Labor to determine whether the 
employer has made a good faith effort to recruit U.S. workers and for 
the public to be aware of the recruiting methods used. It was estimated 
that annually 200 H-1B dependent employers would need to document their 
good faith efforts to recruit U.S. workers. The filing of such records 
was estimated to take approximately twenty minutes per employer for an 
annual burden of approximately 66.7 hours.
    Commenters felt the burden for this item was underestimated, i.e., 
that DOL should recognize that employers file more than one LCA each 
year and that DOL should recite rather than just refer to the EEOC 
regulation requiring this documentation.
    As noted in F. above and as discussed at some length in Section 
IV.G.5 of the preamble, DOL believes that employers are required to 
preserve the records required under current EEOC requirements. With the 
exception of the list to be included in the public access file (and 
here too employers have the option of putting the actual records in the 
file), DOL is not requiring employers to create any documents, but 
rather to preserve those documents which are created or received. 
Further, DOL, upon further review, has determined that employers will 
not be required to maintain evidence of industry practice for 
recruitment. The only additional recordkeeping burden required by these 
regulation is that the public disclosure file contain a summary of the 
principal recruitment methods used and the time frames in which they 
were used. This recordkeeping requirement may be satisfied by creating 
a memorandum to the file or the filing of pertinent documents. It is 
estimated that 200 H-1B employers will file such documents or 
memorandum 5 times annually and that each recordkeeping will take 20 
minutes, for an annual burden of approximately 333 hours.

H. Documentation of Fringe Benefits (Sec. 655.731(b))

    Pursuant to the ACWIA, all employers of H-1B workers are required 
to offer benefits to H-1B workers on the same basis and under the same 
criteria as offered to similarly employed U.S. workers. The proposed 
regulations would require employers to retain copies of all fringe 
benefit plans and summary plan descriptions, including all rules 
regarding eligibility and benefits, evidence of what benefits are 
actually provided to individual workers and how costs are shared 
between employers and employees. These records are necessary for the 
Department to determine whether the H-1B nonimmigrants are offered the 
same fringe benefits as similarly employed U.S. workers. Copies of most 
fringe benefit programs are required to be maintained by Internal 
Revenue Service and Pension and Welfare Benefits Administration 
regulations; thus there would not ordinarily be an additional 
recordkeeping burden from these requirements. The Department estimated 
that 2,500 employers would spend approximately 15 minutes each 
documenting unwritten plans, for an annual burden of 625 hours.
    The Department in the proposed rule also inquired as to whether it 
would be possible to require multinational employers to keep H-1B 
workers on ``home country'' benefit plans in lieu of those provided to 
U.S. workers and what records would need to be kept to demonstrate the 
value of the ``home-country'' benefits and those provided to U. S. 
workers.
    A commenter said that DOL should recite, rather than just refer to 
the PWBA and IRS regulations. Another commenter stated it was unclear 
whether in fact these regulations governing retention of benefits 
information meet the DOL requirements for the H-1B program, since the 
DOL regulations require specific documentation of the comparative 
benefits offered and received by H-1B employees and their U.S. 
counterparts, including the need to determine the appropriate 
comparison group and then require the maintenance of all the 
information in the public inspection file for each H-1B worker. Another 
comment stated that DOL has failed to consider the additional burden of 
comparing fringe benefits offered by similar employers in the area 
which DOL is proposing to require. Commenters questioned the need for 
the documentation of fringe benefits to be placed in each public access 
file, with others suggesting more flexibility in how the documentation 
should be provided. One commenter suggested that employers be allowed 
to select equivalent but different valued benefits as long as employers 
can show that all similarly situated workers were offered the same 
array of benefits.
    It is believed that almost all employers of H-1B workers would, 
absent the regulation, have already created an employee handbook or 
have a summary description plan required by ERISA regulations which 
would satisfy the H-1B regulatory requirement. The provision being 
considered to require a comparison of fringe benefits offered by 
similar employers in the area is not included in this interim final 
rule. DOL is not requiring that detailed records of fringe benefits be 
maintained in each public access file. These records may be kept in a 
master file or in any other manner the employer desires. The public 
access file need only contain a summary of the benefits offered to U.S. 
workers in the same occupation as H-1B workers, including a statement 
of how employees are differentiated, if at all. Ordinarily this would 
be satisfied with the employee handbook or summary description 
discussed above. Where an employer is providing home country benefits, 
the employer need only place a notation to that effect in the public 
access file.
    There are an estimated 10 percent of H-1B employers, or 6,350 who 
provide fringe benefits, such as bonuses, vacations and holidays, not 
required by ERISA regulations to be documented. It is estimated to 
document these plans would take 15 minutes per employer, for an annual 
burden of 1,588 hours (6,350  x  15 minutes). It is further estimated 
that 25 percent of H-1B employers (15,875) are multinational employers 
and that a note to the file that these workers receive ``home country'' 
benefits would take 5 minutes per employer for an annual burden of 
1,323 hours. The total estimated burden for this item is 2,911 hours.

I. Wage Recordkeeping Requirements Applicable to Employers of H-1B 
Nonimmigrants

    The Department republished and asked for comment on several 
provisions of the December 20, 1994 Final Rule (59 FR 65646) which were 
published for notice and comment on October 31, 1995 (60 FR 55339). 
Existing regulations require all H-1B employers to document their 
actual wage system to be applied to the H-1B nonimmigrants and U.S. 
workers. They are also required to keep payroll records for non-FLSA 
exempt H-1B workers and other employees for the specific employment in 
question. The proposed rule would decrease the burden on employers of 
keeping hourly pay records for U.S. workers, requiring such records 
only if either the worker is not

[[Page 80116]]

paid on a salary basis, or the actual wage is stated as an hourly wage. 
For H-1B workers, such records must also be kept if the prevailing wage 
is expressed as an hourly rate. The statute requires that the employer 
pay H-1B nonimmigrants the higher of the actual or prevailing wage. The 
Department explained that in order to determine if the employer is 
paying the required wage, it must be able to ascertain the system an 
employer uses to determine the wages of non-H-1B workers. The 
Department also stated that it is essential to require the employer to 
maintain payroll records for the employer's employees in the specific 
employment in question at the place of employment to ensure that H-1B 
nonimmigrants are being paid at least the actual wage being paid to 
non-H-1B workers or the prevailing wage, whichever is higher. The 
Department estimated that approximately 50,000 employers employ H-1B 
nonimmigrants. The documentation would have to be done only one time 
for each employer. Hourly pay records would have to be prepared with 
respect to all affected employees each pay period. The Department 
estimated that the public burden wold be approximately 1 hour per 
employer per year to document the actual wage system for a total burden 
to the regulated community of 50,000 hours in a year.
    The payroll recordkeeping requirements are virtually the same as 
those required by the Fair Labor Standards Act (FLSA) and any burden 
required is subsumed in the OMB Approval No. 1215-0017 for those 
regulations at 29 CFR Parts 516, except with respect to records of 
hours worked for exempt employees. There would be no burden for U.S. 
workers since as a practical matter, hours worked records would be 
required for U.S. workers only if they are not exempt from FLSA, or if 
they are exempt but paid on an hourly basis (certain computer 
professionals), and therefore would keep hourly records in any event. 
The Department estimates that 55,000 H-1B workers will be paid on a 
salary basis. Hours worked records would be required for these workers 
only if the prevailing wage is expressed as an hourly rate--estimated 
to 17 percent of all cases. The Department estimated a burden of 2.5 
hours per worker per year, for 9,350 workers and a total of 23,375 
hours.
    Several commenters stated that DOL had grossly underestimated the 
burden of documenting the objective wage system. Some indicated that it 
was ludicrous to estimate that the documentation is done only once, 
since wage systems continually change, documentation will need be done, 
at a minimum, each time a new LCA is prepared and employers do not hire 
H-1B nonimmigrants only for one position in the organization. Thus, DOL 
must calculate how many different job categories are filled by H-1B 
nonimmigrants on average for each employer to estimate how many times 
the burden of documenting the objective wage system occurs annually. 
Further, the documentation must be sufficiently detailed to allow a 
third party to determine the actual wage, making the burden higher than 
estimated. Some commented that the proposed regulation requires the 
actual wage be determined and documented anew for each H-B hire, along 
with periodic adjustments to the actual wage system.
    The Department has deleted the provisions suggesting that the 
employer's wage system must be objective, as well as the statement that 
it must be described in the public disclosure file with detail 
sufficient for a third party to determine the actual wage rate for an 
H-1B nonimmigrant. As stated above, the requirement that a description 
of the actual wage system be included in the public access file is 
already contained in the regulations at section 655.760(a)(3). 
Therefore these regulations create no additional burden for this 
requirement.
    Some commenters stated that while DOL estimated that only 17 
percent of the prevailing wages provided to employers by State 
Employment Security Agencies (SESAs) are expressed as hourly rates, 
their experience was that SESAs regularly provides employers and 
attorneys with the prevailing wage stated as an hourly rate.
    With respect to the concern expressed that SESA more frequently 
issues hourly rates, the modification to section 655.731(a)(2) in the 
interim final rule will provide that employer shall convert the 
prevailing wage determination into the form which accurately reflects 
the wages which it will pay.
    The Department has also concluded that a revision of the regulation 
is appropriate to remove the requirement that the employer keep hourly 
wage records for its full-time H-1B employees paid on a salary basis. 
The regulation continues to require employers to keep hours worked 
records for employees who are not paid on a salary basis and for part-
time H-1B workers, regardless of how paid. The additional burden of 
keeping records for salaried H-1B workers who are exempt from the FLSA 
is estimated at 2.5 hours per worker for 10,500 workers (1.5 percent of 
total H-1B workers), for a total annual burden of 26,250 hours.

J. Information Form Alleging H-1B Violations

    The ACWIA requires DOL to develop a procedure so that a person, 
other than an aggrieved party, can provide, in writing on a form 
developed by DOL, information alleging H-1B program violations. The 
Department proposes that a single form be used by any party alleging 
violations, to the Wage and Hour Division of the U.S. Department of 
Labor, whether a complainant or another source. The H-1B Nonimmigrant 
Information Form, WH-4, is included in this Interim Final Rule for 
public review and comment. It is estimated that 200 such responses will 
be received annually and that each response will take approximately 20 
minutes, for a total burden of 67 hours.

Total Annual Hours Burden for all Information Collections--667,423 
Hours

    Retention of Records: The current regulations provide at section 
655.760 that copies of the LCAs and its documentation are to be kept 
for a period of one year beyond the end of the period of employment 
specified on the LCA or one year from the date the LCA was withdrawn, 
except that if an enforcement action is commenced, these records must 
be kept until the enforcement procedure is completed as set forth in 
part 655, subpart I. The payroll records for the H-1B employees and 
others employees in the same occupational classification must be 
retained for a period of three years from the date(s) of the creation 
of the record(s), except that if an enforcement proceeding is 
commenced, all payroll records shall be retained until the enforcement 
proceeding is completed. These record retention requirements have been 
approved by OMB under OMB No. 1205-0310.
    After consideration of comments raised in response to the NPRM, the 
Department has clarified the record retention requirements to provide 
that where there is no enforcement action, the employer shall retain 
required records for a period of one year beyond the last date on which 
any H-1B nonimmigrant is employed under the labor condition application 
or, if no nonimmigrants were employed under the labor condition 
application, one year from the date the labor condition application 
expired or was withdrawn.
    H-1B employers may be from a wide variety of industries. Salaries 
for employers and/or their employees who perform the reporting and

[[Page 80117]]

recordkeeping functions required by this regulation may range from 
several hundred dollars to several hundred thousand dollars where the 
corporate executive office of a large company performs some or all of 
these functions themselves. Absent specific wage data regarding such 
employers and employees, respondent costs were estimated in the 
proposed rule at $25 an hour. Total annual respondent hour costs for 
all information collections were estimated to be $8,105,887.50 ($25.00 
x  324,235.5 hours).
    Some commenters questioned the $25 per hour estimate for respondent 
costs, indicating that in order to comply with the information 
requirements, H-1B employers must employ high-level compensation 
professionals and human resource professionals. The Department 
recognizes that some employers may employ highly-paid professionals to 
advise them on how to comply with the H-1B program requirements. 
However, it is believed that such a need will be short-lived and that 
once a system is in place, compliance can be maintained without this 
highly paid professional assistance. The $25 an hour respondent cost is 
an average cost, which recognizes higher initial cost to effect 
compliance, as well as the low cost of performing the clerical filing 
functions. Further, as noted above, in addition to the guidance 
provided in this regulation and its preamble, the Department intends to 
provide non-technical guidance printed material and information in 
electronic format which should greatly assist employers and employees 
in understanding the H-1B program requirements. Total annual respondent 
hour costs for all information collections are estimated at $16,685,575 
($25.00  x  667,423).
    The paperwork requirements discussed above will not become 
effective until OMB has reviewed and approved these requirements and 
assigned an OMB approval number.

II. Background

    On November 29, 1990, the Immigration and Nationality Act was 
amended by the Immigration Act of 1990 (IMMACT 90) (Pub. L. 101-649, 
104 Stat. 4978) to create the ``H-1B visa program'' for the temporary 
employment in the United States (U.S.) of nonimmigrants in ``specialty 
occupations'' and as ``fashion models of distinguished merit and 
ability.'' The H-1B provisions of the INA were amended on December 12, 
1991, by the Miscellaneous and Technical Immigration and Naturalization 
Amendments of 1991 (MTINA) (Pub. L. 102-232, 105 Stat. 1733). Further 
amendments were made to the H-1B provisions of the INA on October 21, 
1998, by enactment of the American Competitiveness and Workforce 
Improvement Act (ACWIA) (Title IV of Pub. L. 105-277, 112 Stat. 2681). 
In addition, the H-1B provisions of the INA were amended in October, 
2000 by enactment of the American Competitiveness in the Twenty-first 
Century Act of 2000 (Pub. L. 106-313, 114 Stat. 1251, October 17, 
2000), the Immigration and Nationality Act--Amendments (Pub. L. 106-
311, 114 Stat. 1247, October 17, 2000), and section 401 of the Visa 
Waiver Permanent Program Act (Pub. L. 106-396, 114 Stat. 1637, October 
30, 2000) (collectively, the October 2000 Amendments).
    These cumulative amendments of the INA assigned certain 
responsibility to the Department of Labor (Department or DOL) for 
implementing several provisions of the Act relating to the temporary 
employment of certain nonimmigrants. The H-1B provisions of the INA 
govern the temporary entry of foreign ``professionals'' to work in 
``specialty occupations'' in the United States under H-1B visas. 8 
U.S.C. 1101(a)(15)(H)(i)(b), 1182(n), and 1184(c). The H-1B category of 
specialty occupations consists of occupations requiring the theoretical 
and practical application of a body of highly specialized knowledge and 
the attainment of a Bachelor's or higher degree in the specific 
specialty as a minimum for entry into the occupation in the United 
States. 8 U.S.C. 1184(i)(1). In addition, an H-1B nonimmigrant in a 
specialty occupation must possess full State licensure to practice in 
the occupation (if required), completion of the required degree, or 
experience equivalent to the degree and recognition of expertise in the 
specialty. 8 U.S.C. 1184(i)(2). The category of ``fashion model'' 
requires that the nonimmigrant be of distinguished merit and ability. 8 
U.S.C. 1101(a)(15)(H)(i)(b).

A. Changes Made by the ACWIA and the October 2000 Amendments

    The ACWIA made numerous significant changes in the H-1B provisions. 
One was the temporary increase in the maximum number of H-1B visas over 
the three fiscal years following ACWIA's enactment: For fiscal years 
1999 and 2000, the cap would be 115,000; for fiscal year 2001, the cap 
would be 107,500; and for fiscal year 2002 (and thereafter), the cap 
would return to the original 65,000. Another significant change was the 
imposition of additional attestation requirements for certain employers 
to provide better protections to U.S. workers. The additional 
attestation requirements apply to ``H-1B-dependent employers'' and to 
employers who have been found to have committed a willful failure or 
misrepresentation with respect to the H-1B requirements (hereafter 
referred to as ``willful violators''). H-1B-dependent employers and 
willful violators must attest that they: (1) Have not displaced and 
will not displace a U.S. worker within the period beginning 90 days 
before and ending 90 days after the filing of an H-1B petition; (2) 
will not place an H-1B worker with another employer with indicia of an 
employment relationship without making an inquiry to assure 
displacement has not and will not take place within the period 
beginning 90 days before and ending 90 days after the placement; and 
(3) have taken good faith steps to recruit U.S. workers for the job for 
which the H-1B workers are sought, and will offer the job to any 
equally or better qualified U.S. worker. The recruitment provision does 
not apply to an LCA for an H-1B worker who is ``exceptional,'' an 
``outstanding professor or researcher,'' or a ``multinational manager 
or executive'' within the meaning of section 203(b)(1) of the INA. The 
ACWIA specified that both the displacement and recruitment/hiring 
protections become effective upon the date of the Department's final 
regulation and apply only to LCAs filed before October 1, 2001. An H-
1B-dependent employer or willful violator filing an LCA which will be 
used only for ``exempt'' H-1B workers is not required to comply with 
the new attestation requirements for that LCA.
    The ACWIA also instituted a filing fee of $500, to be collected by 
INS, for initial petitions and first extensions filed on or after 
December 1, 1998, and before October 1, 2001. Institutions of higher 
education and related or affiliated nonprofit entities, nonprofit 
research organizations, and Governmental research organizations are 
exempt from the new fee. The fees are to be used for job training, low-
income scholarships, and program administration/enforcement.
    The ACWIA included other generally applicable worker protections, 
specifically: whistleblower protection, prohibitions against 
reimbursement of the $500 filing fee and against penalizing an H-1B 
worker who terminates employment prior to a date agreed with the 
employer, and a requirement that the employer pay wages during 
nonproductive time if such time is not due to reasons occasioned by the 
worker. The ACWIA

[[Page 80118]]

also required employers to offer H-1B workers fringe benefits on the 
same basis and in accordance with the same criteria as U.S. workers.
    The ACWIA specified new civil money penalties ranging from $1,000 
to $35,000 per violation, along with debarment. New investigative 
procedures were created, authorizing the Department to conduct 
``random'' investigations of willful violators during the five-year 
period after the finding of such violation, and establishing an 
alternative investigation protocol based on information indicating 
potential violations obtained from sources other than aggrieved 
parties. Enforcement of the requirement that employers hire U.S. 
workers if they are equally or better qualified than the H-1B workers 
is carried out by the Attorney General through arbitration.
    The ACWIA mandated a particular method of computation of the local 
prevailing wage for purposes of the requirements of the H-1B program 
and the permanent immigrant worker program with respect to employees of 
institutions of higher education and related or affiliated nonprofit 
entities, nonprofit research organizations, and Governmental research 
organizations. Under the ACWIA provision, the prevailing wage level is 
to take into account only employees at such institutions and 
organizations.
    The ACWIA became law on October 21, 1998. With one exception, its 
provisions took effect at that time, and apply both to existing LCAs 
and to LCAs filed in the future. Pursuant to section 412(d) of the 
ACWIA and section 212(n)(1)(E)(ii) of the INA as amended by the ACWIA, 
8 U.S.C. 1182(n)(1)(E)(ii), the special attestation provisions 
regarding displacement and recruitment are applicable only to LCAs 
filed by H-1B-dependent employers and willful violators on or after the 
date this Interim Final Rule becomes effective and until October 21, 
2001.
    In addition, section 415(b) of the ACWIA provided that the 
amendments to section 212(p) of the INA, 8 U.S.C. 1182(p)--relating to 
computing the prevailing wage level for employees of an institution of 
higher education or a related or affiliated nonprofit entity, for 
employees of a nonprofit research organization or Governmental research 
organization, or for professional athletes--apply to prevailing wage 
computations for LCAs filed before October 21, 1998, ``but only to the 
extent that the computation is subject to an administrative or judicial 
determination that is not final as of such date.'' Therefore, the 
regulations in parts 655 and 656 to implement section 212(p) apply 
retroactively to any prevailing wage determinations thereunder which 
were not final as of October 21, 1998.
    Two other ACWIA's provisions contained temporal qualifications, 
relating to the Department's authority to conduct random investigations 
and other source investigations (INA, sections 212(n)(2)(F), 
212(n)(2)(G), respectively). The Act specified that the Department's 
authority, pursuant to section 212(n)(2)(F) of the INA as amended by 
the ACWIA, 8 U.S.C. 1182(n)(2)(F), to conduct random investigations of 
employers who have committed a willful failure to meet a condition of 
their LCAs or who have made a willful misrepresentation of material 
fact applies only where such a finding has been made by the Secretary 
on or after October 21, 1998. The Act also specified that the 
Department's authority, pursuant to section 212(n)(2)(G), 8 U.S.C. 
1182(n)(2)(G), to conduct investigations based on credible information 
from a source other than an aggrieved person would ``sunset,'' i.e., 
expire, on September 30, 2001.
    The October 2000 Amendments made substantial increases in the 
numbers of H-1B visas available for the employment of nonimmigrants: 
195,000 each year for fiscal years 2001, 2002, and 2003 (with the 
number thereafter to revert to the original 65,000 per fiscal year); an 
unspecified additional number for fiscal year 1999 to cover 
nonimmigrants issued visas above the authorized number for that year; 
an unspecified additional number for fiscal year 2000 to cover 
petitions filed before September 1, 2000; and an unlimited number for 
nonimmigrants employed by institutions of higher education, by their 
related or affiliated nonprofit entities, by nonprofit research 
organizations, or by governmental research organizations (i.e., visas 
for employees of such entities are not counted against the annual 
limits). The Amendments extended the effective periods for two ACWIA 
provisions: The additional attestation elements for H-1B-dependent 
employers and willful violator employers were extended until October 1, 
2003; the Department's authority to conduct investigations based on 
sources other than aggrieved parties was extended through September 30, 
2003. In addition, the Amendments created a ``portability'' option for 
H-1B nonimmigrants, by authorizing their change of employers (from one 
H-1B employer to another) ``upon the filing by the prospective employer 
of a new petition on behalf of such nonimmigrant'' (i.e., eliminating 
the need to await the INS adjudication of the petition). Further, the 
Amendments authorized the extension of H-1B status for nonimmigrants in 
cases of delayed INS adjudications of petitions for employment-based 
immigration or applications for adjustment of status for permanent 
residence; the extensions of H-1B status are to be made by the INS in 
one-year increments. The Amendments doubled the ACWIA-created petition 
fee (from $500 to $1,000) and extended the effective period of the fee 
provision to October 1, 2003. The Amendments broadened the ACWIA's 
exemption of certain employers from payment of the filing fee (to 
include nonprofit entities engaging in established curriculum-related 
clinical training of students registered at such institutions). In 
addition, the Amendments made some changes in the ACWIA allocations of 
fee monies for various training programs, increased the ACWIA 
allocation of fee monies to the INS for processing of LCAs, and reduced 
the ACWIA allocation of fee monies to the Department for processing and 
enforcement of LCAs (i.e., reduced from 6 percent to 5 percent, to be 
divided equally between processing and enforcement). Finally, the 
Amendments directed that an amended H-1B petition was not required to 
be filed by an employer that was involved in a corporate restructuring, 
where the nonimmigrant's terms and conditions of employment remained 
the same.
    The Department notes that the ACWIA was the product of extensive 
negotiations between the Administration and the House and the Senate. 
See 144 Cong. Rec. H8584 (Sept. 24, 1998); 144. Cong. Rec. S10877 
(Sept. 24, 1998). Earlier in the year both the House and the Senate had 
issued very different bills to address the H-1B program (see S. Rep. 
No. 105-186, 105th Cong., 2d Sess. (1998); H.R. Rep. No. 105-657, 105th 
Cong., 2d Sess. (1998)). The resulting legislation was a compromise, 
and there was no conference committee report or joint statement by the 
negotiators that would provide clear legislative history as to its 
intent. Although Senator Abraham and Congressman Lamar Smith, as well 
as other individual Congressman, made remarks in the Congressional 
Record, their views as to the meaning and effect of the legislation are 
dramatically different.
    The Department further notes that the October 2000 Amendments were 
also the product of extensive negotiations, but that there is very 
little legislative history concerning the limited

[[Page 80119]]

provisions that were actually enacted by Congress.
    Keeping in mind the difficulty with construing legislation under 
these circumstances, the Department has--in the Preamble of this 
Interim Final Rule--cited to the legislative history of ACWIA in both 
the House and the Senate, and to the extensive remarks of both Senator 
Abraham and Congressman Smith.

B. Summary of Comments on the January 5, 1999 NPRM

    To obtain public input to assist in the development of interim 
final regulations, the Department published a Notice of Proposed 
Rulemaking (NPRM) and invited public comment in the Federal Register on 
January 5, 1999. The NPRM also stated that the Department was re-
publishing for notice and further comment certain provisions of the 
Final Rule promulgated in December 1994. These provisions had been 
proposed for comment on October 31, 1995, during the pendency of the 
litigation in National Association of Manufacturers v. Reich, 1996 WL 
420868 (D.D.C. 1996) (NAM), which resulted in an injunction against the 
Department's enforcement of some of the provisions on Administrative 
Procedure Act (APA) procedural grounds. In addition, the Department 
sought comment on a number of interpretive issues arising under the 
existing regulations, set forth in proposed Appendix B. The thirty-day 
comment period set forth in the January 5, 1999 NPRM was extended until 
February 19, 1999.
    The Department has, in this Interim Final Rule, carefully 
considered comments received in response to the October 31, 1995 
Proposed Rule in conjunction with the comments received in response to 
the January 5, 1999 NPRM. The 1995 Proposed Rule elicited comments from 
13 commenters, including one from a trade association, one from an 
association representing immigration attorneys, one from an association 
representing firms which provide international personnel to American 
businesses, five from information technology companies, one from an 
accounting and auditing firm, two from universities and two from law 
firms. The proposals which then elicited the greatest number of 
comments concerned the actual wage system (Appendix A), workplace 
notice, the 90-day short-term placement option for H-1B workers who 
move to worksite(s) not covered by LCA(s), and the use of the 
Government per diem schedule for travel expenses for those workers. All 
but two of these commenters objected to the Department's proposal that 
the actual wage be based on a system utilizing objective criteria. 
Seven of the commenters objected to the Department's proposals on the 
posting of notices at worksites not controlled by the employer, while 
eight of the commenters objected to the Department's proposals with 
regard to the 90-day option. Five of the commenters objected to the use 
of the Government per diem schedule for reimbursement of travel 
expenses under this option.
    The Department received 92 comments in response to the January 5, 
1999 NPRM, including comments which were received late but which were 
included in the rulemaking record and fully considered. The commenters 
included individuals, a union, employee associations, lawyers or law 
firms, businesses, trade and business associations, educational and 
research facilities and associations, U.S. Government agencies, and 
Members of Congress (one comment from two Senators and one comment 
signed by 23 Members of Congress (hereafter referred to as 
``Congressional commenters'')).
    The proposals eliciting the greatest numbers of comments were those 
regarding non-productive time (or ``benching''), the information 
required on the LCA regarding the employer's status as H-1B-dependent, 
recruitment, displacement, and the posting of notices. Individual 
commenters were critical of the H-1B program generally, describing it 
as particularly detrimental to the job security of older Americans, and 
sought more guidance from the Department with regard to procedures 
which American workers may follow to prove displacement. These 
commenters also urged the Department to strictly enforce the ACWIA ``no 
benching'' provisions; include a requirement that all employers check 
the H-1B dependency box on Form ETA 9035, with the imposition of heavy 
fines for noncompliance; and require the physical posting of all 
notices at the place of employment or worksite.
    The union and employee association commenters generally endorsed 
the Department's proposed regulations. Educational and research 
facilities primarily addressed and supported the Department's proposals 
regarding determination of prevailing wages for employees of those 
institutions. These commenters also urged the Department and the INS to 
be consistent in their application of the definitions contained in the 
regulatory provisions.
    Two associations, one representing the interests of immigration 
lawyers and the other representing the interests of firms which provide 
international personnel to American businesses, commented on virtually 
every proposal made by the Department in the NPRM. Lawyers and law 
firms particularly addressed the proposal that all fees and costs 
connected with the filing of the LCA and H-1B petition, including 
attorney and INS fees, are to be borne by the employer. The 
Department's proposal addressing the timing of the H-1B dependency 
determination also drew a strong response from commenters representing 
business interests. Senator Abraham, one of the ACWIA's Congressional 
sponsors, submitted his October 21, 1998 Congressional Record remarks 
to be included in the rulemaking record. Senator Abraham, along with 
Senator Bob Graham, further commented on a number of NPRM provisions 
they believed to be inconsistent with Congressional intent. The 
Department also received a letter signed by 23 Congressmen and 
Senators, including Senators Abraham and Graham. These commenters 
expressed concerns on a number of provisions, including proposed 
paperwork requirements, the requirement that the actual wage be based 
on an objective system, and the 90-day short-term placement option.

III. General Issues Applicable to the Rule

    In the review of the comments and the development of this rule, the 
Department realized that there are a number of general issues which 
affect the entire rule. The following discussion addresses these 
issues.

A. The Administrative Procedure Act

    On January 5, 1999, the Department of Labor published a Notice of 
Proposed Rulemaking (NPRM) in the Federal Register (64 FR 628). The 
Department published the NPRM to obtain public comment and assistance 
in the development of regulations to implement changes made to the INA 
by the ACWIA, and to provide an additional opportunity for comment on 
certain provisions which were previously published for comment as a 
Proposed Rule in 1995 (60 FR 55339). In addition, the Department sought 
comments on various interpretations of the existing regulations, 
published as proposed Appendix B.
    The Department's NPRM set forth specific regulatory language for 
comment on some, but not all, of the issues arising from the provisions 
of the ACWIA. For those issues with no specific regulatory language, 
the Department identified concerns, and set out its proposed approach 
to addressing

[[Page 80120]]

them or described alternative approaches. The Department sought comment 
on all of these issues and proposals.
    The Department was mindful of Congress' intent that the ACWIA 
implementing regulations be promulgated in a ``timely manner;'' the 
legislation allowed a public comment period of ``not less than 30 
days.'' Accordingly, the Department set a 30-day comment period, to 
close on February 4, 1999. Upon petition by the American Council on 
International Personnel (ACIP), the Department extended the comment 
period another 15 days, until February 19, 1999. After consideration of 
the comments received, the Department now issues this Interim Final 
Rule and invites further comment on the regulatory provisions set forth 
in Part IV.A through N of this preamble and the accompanying regulatory 
text. After reviewing any comments received, the Department will issue 
a Final Rule.
    The Department received 13 comments on its regulatory process.
    The comments focused primarily on the length of the comment period 
and the NPRM's lack of regulatory text on various issues. Nine 
commenters generally objected to the length of the comment period in 
combination with the lack of regulatory text, variously contending that 
the requirements of the Administrative Procedure Act (APA) were 
violated in that the bulk of the proposals together with the lack of 
regulatory text, definitions, and clear explanations prohibited 
meaningful comment even within the extended period allowed. The 
American Immigration Lawyers Association (AILA) recommended that the 
Department withdraw the NPRM and issue an Advance Notice of Proposed 
Rulemaking (ANPR). ACIP and Senators Abraham and Graham suggested that 
the Department publish a proposed rule with request for comment prior 
to implementing an interim final or final rule. ACIP also expressed 
concern about the inclusion of the outstanding issues in the 1995 NPRM 
in the proposed rule. In the alternative, ACIP and the American Council 
on Education (ACE) requested the Department to defer enforcement of the 
interim final rule during an employer education period of at least 60 
days following its promulgation.
    The Department has concluded that the delay inherent in the 
publication of an ANPRM or a new NPRM with full regulatory text would 
not be warranted. The new attestation requirements for H-1B-dependent 
employers and willful violators created by the ACWIA do not take effect 
until these regulations are promulgated and will terminate on October 
1, 2003 (with the extended ``sunset'' date specified by the October 
2000 Amendments). Congress specifically allowed a comment period of 30 
days. The Department obliged commenters by extending this period an 
additional 15 days. The analysis of the comments and the preparation of 
this Interim Final Rule have been a complex and time-consuming process. 
The Department is of the view that there should be no further delay of 
key ACWIA provisions. The Department is now providing an additional 
opportunity for comment on the provisions of the Interim Final Rule. 
Also, the Department seeks comments on additional proposals presented 
for the first time; these proposals are not included in the Interim 
Final Rule but are presented for comment for possible inclusion in the 
Final Rule.
    The Department is of the view that the procedure followed on this 
Rule is in full compliance with the notice and comment provisions of 
the APA. The APA requires that an agency include in its notice of 
proposed rulemaking ``either the terms or substance of the proposed 
rule or a description of the subjects and issues involved.'' 5 U.S.C. 
553(b)(3); see Kooritzky v. Reich, 17 F.3d 1509, 1513 (D.C. Cir. 1994). 
Furthermore, the agency must give ``interested persons an opportunity 
to participate in the rulemaking through submission of written data, 
views, or arguments.'' 5 U.S.C. 553(c). Thus, under the plain language 
of the APA, the absence of complete regulatory text in the NPRM does 
not compromise the Department's compliance with the notice and comment 
requirements of the APA.
    The lengthy and detailed preamble to the NPRM, setting forth the 
Department's proposals and concerns on each of the issues, struck a 
balance between the need to promulgate regulations expeditiously 
(created by the ACWIA provision that its new attestation requirements 
would not take effect until regulations are issued and will terminate 
on October 1, 2001 (now extended until October 1, 2003), as well as the 
need to give regulatory guidance with regard to those ACWIA provisions 
which took effect immediately), and the opportunity to provide 
meaningful public comments. Certainly the public has a right to have a 
sufficient description of the subjects and issues involved to offer 
meaningful comment. The Department believes that it has fully 
accommodated this need with its detailed discussion in the NPRM 
preamble. Furthermore, in addition to describing the provisions it 
proposed to promulgate where regulatory text was not included in the 
NPRM, the Department discussed and sought comments on numerous 
additional alternatives it was considering, in an attempt to ensure 
that there would be no surprises to the public if, after a review of 
the comments, it determined that an alternative was appropriate for the 
Interim Final Rule. The NPRM preamble is sufficiently detailed to 
``inform the reader, who is not an expert in the subject area, of the 
basis and purpose for the * * * proposal[s].'' Federal Register Act, 44 
U.S.C. 1501-1511 and regulations thereunder, 1 CFR 1812(a).
    The Department has carefully considered the request for a delay in 
enforcement for 60 days after the effective date of the regulations. 
The Department notes that the new law was extensively negotiated with 
stakeholders for nearly a year before it was enacted, that stakeholders 
have been aware of the Department's proposed approach to the issues for 
more than a year, that a number of the provisions will be in effect for 
only a limited period of time, and that several provisions that are the 
subject of this rulemaking relate to applications of the law that have 
been in effect for nearly a decade and have been addressed in prior 
rulemaking. Furthermore, the Department plans to undertake extensive 
education efforts, as discussed below. The Department has therefore 
concluded that it is inappropriate to administratively declare a period 
in which civil money penalties and debarment would not be imposed. 
However, we would point out that in all cases the Department's 
enforcement and the penalties imposed take into consideration the full 
circumstances of any violations found, within the constraints of the 
statutory requirements. See INA, section 212(n)(2)(C), 8 U.S.C. 
1182(n)(2)(C), and Sec. 655.810 of this Rule. Furthermore, with regard 
to the recordkeeping requirements in particular, as discussed in IV.M.5 
below, the Department will issue CMP assessments for violations only 
where it finds that the violation impedes the ability of the 
Administrator to determine whether a violation of the H-1B requirements 
has occurred, or the ability of members of the public to have 
information needed to file a complaint or information regarding alleged 
violations of the Act.
    Finally, the Department notes that the changes to the method of 
making prevailing wage determinations for academic institutions and 
related nonprofit entities, nonprofit research organizations, and 
Governmental research organizations, set forth at

[[Page 80121]]

Sec. Sec. 655.731(a)(2) and 656.40, are effective immediately and apply 
retroactively to all LCAs filed on or after October 21, 1998, as well 
as to all LCAs filed earlier to the extent that the prevailing wage 
determination was subject to an administrative or judicial 
determination that was not final as of October 21, 1998. Pursuant to 5 
U.S.C. 553(d), the Department finds good cause to make these provisions 
effective immediately in light of the statutory provisions at Section 
415(b) of the ACWIA, expressly making the changes in the prevailing 
wage determinations apply retroactively.

B. Dissemination of Information to the Public

    A significant concern expressed by a large number of commenters is 
the need to ensure that both U.S. and H-1B workers, as well as 
employers, are well-informed about their rights and obligations under 
the H-1B program in general, and the new provisions of the ACWIA in 
particular. The Department appreciates the importance of such education 
and intends to undertake active efforts to educate the public about the 
H-1B program. Specifically, the Department intends to prepare and make 
available pamphlets, fact sheets and a small business compliance guide 
in both written and electronic formats. These resources will explain 
the obligations of employers, the rights of H-1B and U.S. workers, and 
the roles of the Department of Labor and the other government agencies 
involved in the program (the INS, the Departments of Justice and 
State). The resources will also reference materials available from 
these agencies that bear on the employment of H-1B nonimmigrants. The 
Department also plans to work with the INS and the State Department to 
develop a pamphlet to be provided to visa applicants and posted 
electronically that will explain rights and responsibilities under the 
H-1B program.
    The electronic compliance material will be available through the 
Department's web page at http://www.dol.gov, which will provide 
electronic links to other sources of information that bear on the 
employment of nonimmigrants. From the home page, the material will be 
accessible either by going to DOL Agencies: Employment Standards 
Administration, Wage and Hour Division (WHD), then to Laws and 
Regulations, and then to Compliance Assistance Information: Wage and 
Hour Division, or by going directly to 
http://www2.dol.gov/dol/esa/public/regs/compliance/whd/whdcomp.htm.
    The Department also intends to add an ``H-1B Advisor'' to its 
Internet ``Employment Laws Assistance for Workers and Small 
Businesses'' (ELAWS) system (located at the bottom of the home page). 
The H-1B ELAWS Advisor will be an interactive program that helps 
employers, employees, and other interested parties determine their H-1B 
rights and responsibilities, 24 hours-a-day, 7 days-a-week. The Advisor 
imitates the interaction an individual may have with a DOL expert--it 
asks questions, provides information, and directs the user to the 
appropriate resolution based on the responses given.
    This information may also be obtained from the Wage and Hour 
Division's national and local offices. Mail requests should be 
addressed to the Wage and Hour Division Immigration Team, Room S-3510, 
200 Constitution Avenue, NW., Washington, DC 20210. Telephone requests 
should be made of the Wage and Hour Division Immigration Team at (202) 
693-0071.
    The addresses and phone numbers for Wage-Hour's district offices 
may be found on the Department's website at http://www.dol.gov/dol/esa/public/contacts/whd/america2.htm, and in the Federal government section 
of local telephone directories. Additionally, the Interim Final Rule 
refers to three electronic resources: America's Job Bank, O*NET, and 
the Occupational Outlook Handbook . The job bank may be accessed at 
http://www.ajb.dni.us. The O*NET may be downloaded for free or ordered 
through the Government Printing Office, which can be reached through 
the Department's weblink at http://www.doleta.gov/programs/onet. The 
Occupational Outlook Handbook, published by the Department/s Bureau of 
Labor Statistics, may be found at http://stats.bls.gov/ocohome.htm.
    Finally, the Department will continue its practice of making 
available speakers for groups affected by the Department's 
administration of the H-1B program. The Department will also furnish 
information and copies of its resource materials to both employee and 
industry organizations to facilitate distribution to their member 
organizations.

IV. Discussion of Provisions of Interim Final Rule and Comments

    Issues arising under the Proposed Rule, including the Department's 
response to comments thereon are discussed below. For the convenience 
of the public, the numbering in this part of the Preamble remains the 
same as in the Proposed Rule unless otherwise indicated.
    The Department notes that, in a few instances, it is requesting 
comments in the Interim Final Rule on a regulation or an approach to a 
regulation on which it has not previously sought comment. These 
provisions are not included in the Interim Final Rule, but rather will 
be considered when the Department promulgates the Final Rule after 
review of any comments. These issues are highlighted in the preamble.
    The Department also notes that the new regulatory text published 
here generally includes all of the surrounding regulatory text in order 
to provide context to the reader. However, the only provisions which 
are open for comment are the issues discussed in the Preamble.
    Further, the Department notes that the Interim Final Rule includes 
changes in the regulations to implement the October 2000 Amendments. 
These matters are discussed in the appropriate sections of the 
Preamble, and comments on the provisions are invited.
    The Department has been working with the INS to coordinate our 
respective rulemaking efforts under the Act and to achieve consistency 
in the implementation of the ACWIA provisions and the October 2000 
Amendments.

A. What Constitutes an ``Employer'' for Purposes of the ACWIA 
Provisions? (Sec. 655.736(b) and Sec. 655.730(e))

    Section 212(n)(3)(C)(ii) of the INA as amended by the ACWIA directs 
that ``any group treated as a single employer under subsection (b), 
(c), (m), or (o) of section 414 of the Internal Revenue Code of 1986 
shall be treated as a single employer'' for purposes of defining an 
``H-1B--dependent employer.'' These provisions, found at 26 U.S.C. 
414(b), (c), (m) and (o), concern the circumstances in which ostensibly 
separate businesses are treated by the Internal Revenue Code (IRC) as a 
single employer for purposes of pension and other deferred compensation 
plans.
    Section 414(b), (c), and (m) of the IRC, respectively, define 
``controlled group of corporations,'' ``partnerships, proprietorships, 
etc., which are under common control,'' and ``affiliated service 
group.'' Section 414(o) provides that the Department of the Treasury 
may issue regulations addressing other business arrangements, including 
employee leasing, in which a group of employees are treated as employed 
by the same employer. However, the Department of the Treasury has not 
issued any regulations under this provision; therefore Section 414(o) 
will not be taken into account in determining who is treated as a 
single

[[Page 80122]]

employer for ACWIA purposes unless regulations are issued by the 
Department of the Treasury during the period the H-1B-dependency 
provisions of the ACWIA are effective.
    Section 414(b) of the IRC provides that all employees within a 
``controlled group of corporations'' (within the meaning of section 
1563(a) of the Code, determined without regard to sections 1563(a)(4) 
and (e)(3)(C)) are treated as employed by a single employer. Under 
section 1563(a) and the related Treasury regulations, a controlled 
group of corporations is a parent-subsidiary-controlled group, a 
brother-sister-controlled group, or a combined group. 26 U.S.C. 
1563(a); 26 CFR 1.414(b)-1(a). A parent-subsidiary is, generally, one 
or more chains of corporations connected through stock ownership with a 
common parent corporation where at least 80 percent of the stock (by 
voting rights or value) of each subsidiary corporation is owned by one 
or more of the other corporations (either another subsidiary or the 
parent corporation), and the common parent corporation owns at least 80 
percent of the stock of at least one subsidiary. In general terms, a 
brother-sister controlled group is a group of corporations in which 
five or fewer persons (individuals, estates or trusts) own 80 percent 
or more of the stock of the corporations and certain other ownership 
criteria are satisfied. A combined group is a group of three or more 
corporations, each of which is a member of a parent-subsidiary 
controlled group or a brother-sister controlled group and one of which 
is a common parent corporation of a parent-subsidiary controlled group 
and is also included in a brother-sister controlled group.
    Section 414(c) of the IRC and the related Treasury regulations 
state that all employees of trades or businesses (whether or not 
incorporated) that are under common control are treated as employed by 
a single employer. 26 U.S.C. 414(c); 26 CFR 1.414(c)-2. Trades or 
businesses include sole proprietorships, partnerships, estates, trusts 
and corporations. Trades or businesses are under common control if they 
are included in a parent-subsidiary group of trades or businesses, a 
brother-sister group of trades or businesses, or a combined group of 
trades or businesses. Generally, the standards for determining whether 
trades or businesses are under common control are similar to the 
standards that apply to controlled groups of corporations. However, for 
these purposes, pursuant to 26 CFR 1.414(c)-2(b)(2), ownership of at 
least an 80 percent interest in the profits or capital interest of a 
partnership or the actuarial value of a trust or estate constitutes a 
controlling interest in a trade or business.
    Section 414(m) of the IRC provides that all employees of the 
members of an ``affiliated service group'' are treated as employed by a 
single employer. 26 U.S.C. 414(m). In general terms, an affiliated 
service group is a group consisting of a service organization (the 
``first organization''), such as a health care organization, a law firm 
or an accounting firm, and one or more of the following: (a) A second 
service organization that is a shareholder or partner in the first 
organization and that regularly performs services for the first 
organization (or is regularly associated with the first organization in 
performing services for third persons), or (b) any other organization 
if (i) a significant portion of the second organization's business is 
the performance of services for the first organization (or an 
organization described in clause (a) of this sentence or for both) of a 
type historically performed in such service field by employees, and 
(ii) ten percent or more of the interest in the second organization is 
held by persons who are highly compensated employees of the first 
organization (or an organization described in clause (a) of this 
sentence). IRS has issued proposed regulations at 52 FR 32502 (Aug. 27, 
1987), which may be consulted to ascertain IRS's interpretation of 
these provisions.
    In the event of an H-1B investigation involving the issue of what 
entity or entities constitute a single employer for purposes of the 
ACWIA dependency provisions, an employer will be required to provide 
documentation necessary to enable the Department to apply these IRC 
provisions. The Department emphasizes that if an employer wishes to use 
the definitions in section 414(b), (c) or (m) of the IRC, it will be 
the employer's burden to establish that it meets the requirements of 
the IRC and the regulations thereunder.
    In the NPRM, the Department stated that it was considering the 
effect and implications of adopting this single definition of 
``employer,'' as set forth in these IRC sections for all purposes under 
this program, to the extent it may serve to accommodate business 
activities and facilitate administration and enforcement of the H-1B 
program. Specifically, the Department sought comment on the 
consequences of a regulation which would provide that where an 
``employer'' files an LCA and thereafter undergoes some change of 
structure (e.g., buy-out by a successor corporation; corporate 
restructuring or ``spin-off'' of subsidiaries), the employer for LCA 
purposes would be the entity which satisfies the IRC definition of a 
single employer. The Department sought comment on whether and how it 
may be able to modify its current position that a new LCA must be filed 
when the employer's corporate identity changes and a new Employer 
Identification Number (EIN) is obtained. Thus, the Department raised 
the possibility an employer which changes its corporate identity 
through acquisition or spin-off would be allowed to forego the filing 
of new LCAs if it documented this change in its public access file, 
provided that it satisfies the IRC definition of a single employer and 
that the documentation includes an express acknowledgment of all LCA 
obligations on the part of the ``new'' entity. The Department also 
sought comments on whether another approach should be used to address 
corporate restructuring.
    The Department received 17 comments on its proposals with regard to 
defining an employer for purposes of the H-1B program.
    ACIP, AILA and the Information Technology Association of America 
(ITAA) strongly opposed using the relatively broad IRC definition of 
``single employer'' for any purpose other than determining whether an 
employer is H-1B-dependent as provided in the ACWIA. These 
organizations generally asserted that there was no basis to infer that 
Congress intended to expand this extraordinarily broad definition to 
the entire H-1B law and that expanded use of this definition would not 
facilitate corporate concerns in administering an employer's 
obligations in the H-1B program.
    AILA further asserted that the IRC ``single employer'' concept is 
designed to prevent the avoidance of employee benefit requirements 
through the use of separate organizations, employee leasing, or other 
arrangements. Therefore, AILA observed, to prevent discrimination in 
employee benefits in favor of highly compensated employees, the 
``single employer'' encompasses all entities that are related by 
financial interest (ownership or transactional). In contrast, AILA 
averred, the H-1B program seeks to protect U.S. workers and, to promote 
this purpose, an ``employer,'' at a minimum, should have an employment 
relationship with respect to covered workers, as defined by the ability 
to hire, fire, pay and other indications of control. Thus, AILA 
concludes, to depart from the longstanding definition of ``employer'' 
in the H-1B program, without explicit statutory authority, would be 
improper.
    Nine commenters (AILA, Cowan & Miller, ITAA, Rubin & Dornbaum, the

[[Page 80123]]

Small Business Survival Committee (SBSC), the U.S. Chamber of Commerce, 
White Consolidated Industries, Network Appliance, and the Fred 
Hutchinson Cancer Research Center (FHCRC)) stated their view that 
extending the use of the definition of ``single employer'' would serve 
no useful purpose in facilitating corporate restructuring and efficient 
H-1B administration. In fact, they asserted, broader application would 
have the opposite effect by requiring multi-entity corporations to 
coordinate many functions among the various entities, including 
benefits, wages, movement of H-1B employees among the entities, lay-
offs, and other purposes, every time an H-1B worker is hired, promoted, 
or moved. The Chamber of Commerce, however, suggested that if a single 
employer analysis is required outside the H-1B-dependent employer 
context, the Department should adopt the four-factor test developed by 
the National Labor Relations Board and approved by the Supreme Court in 
single employer labor law cases, rather than the analyses required by 
IRC Section 414.
    ITAA sought clarification on the calculation of H-1B dependency 
given the ACWIA's definition of ``employer.'' For instance, ITAA noted, 
a controlled group could consist of parent A and subsidiaries B, C and 
D. If subsidiary B were to file an LCA, would the H-1B dependency 
calculation be made using all employees of A, B, C, and D, or only the 
employees of B? The Department believes that, under the IRC definition 
of ``controlled group,'' all of the employees of A, B, C, and D would 
be included in the dependency calculation if any of the subsidiaries or 
the parent company filed the LCA.
    Many employers and their representatives supported the Department's 
proposal to modify its current requirement for filing of a new LCA upon 
a change in the EIN. AILA, ACIP, Intel Corporation (Intel), ITAA and 
the Society for Human Resource Management (SHRM) urged a rule that a 
new or amended LCA and H-1B petition not be required upon an 
acquisition, merger, spin-off, transfer or other corporate 
reorganization regardless of whether there is a change in the EIN. ACIP 
further urged that no new or amended LCA and H-1B petition be required 
whether or not the new entity meets the IRC definition of ``single 
employer.'' Essentially, these groups endorsed a position that they 
stated is similar to the I-9 provisions of the INA, 8 CFR 
274a.2(b)(1)(viii)(A)(6) & (7), whereby the new employer has the option 
of assuming the immigration-related liabilities of the old employer 
regardless of whether the employer assumes any other liabilities in the 
transaction. Similarly, AILA suggested application of established 
successor-in-interest rules. Two other commenters (Kirkpatrick & 
Lockhart, Jose E. Latour and Associates (Latour)) also urged 
consistency between INS and DOL rules.
    ACIP elaborated on this issue, suggesting that continued corporate 
compliance responsibility in the event of restructuring could be 
accomplished via a simple memorandum placed in the public access file, 
rather than a new LCA, except where there is a material change in the 
worker's job duties or the worker is relocated to a site not covered by 
an LCA, or the new entity hires a new H-1B worker. ACIP stated that an 
employer should not be able to use positions on the previous entity's 
LCA to hire a new H-1B nonimmigrant.
    The AFL-CIO opposed the Department's proposed modification to the 
current LCA filing requirements because, in its view, it could create 
the substantial risk that employers, through acquisition or spin-off, 
could in fact create an H-1B-dependent workforce and yet avoid the 
concomitant recruitment and non-displacement obligations of H-1B-
dependent employers. The AFL-CIO pointed out that the governing IRS 
regulations use the ``common control'' test to determine whether a 
parent-subsidiary group of corporations or brother-sister trades or 
business satisfy the Code's definition of single employer. The AFL-CIO 
suggested that under the Department's proposal, a non-H-1B-dependent 
corporation that has filed an LCA, but has yet to hire any H-1B workers 
under that application, could create an H-1B-dependent subsidiary 
corporation that meets the ``common control'' test, but avoid filing a 
new LCA. The parent could then acquire the requested or remaining 
number of H-1B workers on its outstanding LCA, and place them in the 
subsidiary workforce without applying any of the new attestation 
requirements for H-1B-dependent employers.
    The Department believes that the AFL-CIO's legitimate concerns are 
related to the statutory definition of ``dependent employer'' and not 
to the proposal to eliminate the requirement to file a new LCA when an 
employer, as defined by the ACWIA, undergoes a change in corporate 
structure. Thus, given the scenario presented by the AFL-CIO, under the 
ACWIA-imposed definition of ``employer'' the parent corporation and its 
subsidiaries (if they meet the ``common control test'') are a ``single 
employer'' whose entire, combined work force is assessed to determine 
dependency. Under the IRC definition, the H-1B employees of the 
``subsidiary'' are considered part of the larger work force of the 
``parent'' corporation, which then may or may not be a dependent 
employer required to comply with the ACWIA attestation requirements.
    Based on a careful review of all the comments submitted on this 
issue, the Department agrees that the use of the IRC definition of 
``employer'' should be limited to determining H-1B-dependent employer 
status, as set forth in section 212(n)(3)(C)(ii). The IRC rules do not 
appear useful to facilitate the resolution of issues involving changes 
in corporate status.
    However, as urged by the commenters, the Department has concluded 
that it is appropriate to change its current requirement that a new LCA 
(and, as a result, a new H-1B petition) be filed when corporate 
identity changes result in a change in the employer's EIN number. In 
the past, the Department has taken the position that a new LCA must be 
filed to assure continued compliance responsibility by the ``new'' 
employer--a corporate entity other than the one that filed the LCA in 
the first place. The Department understands, however, that when a 
corporate identity changes, it is common for the H-1B worker(s) to 
continue to perform the same job duties in the same location for the 
new, restructured entity, and for the new entity to assume the 
obligations of the previous entity. In such circumstances, where the 
obligations are assumed and there is no real change in the H-1B 
worker's job and his/her ``new'' employer's responsibilities, filing a 
new LCA and H-1B petition solely because of the change in corporate 
structure would be an unnecessary and burdensome exercise for the 
employer, the State Employment Service Agency (SESA) responsible for a 
prevailing wage determination, the Department in reviewing the LCA, and 
the INS in adjudicating the H-1B petition.
    Further support for the Department's position is found in the 
October 2000 Amendments, in which Congress specified:

    An amended H-1B petition shall not be required where the 
petitioning employer is involved in a corporate restructuring, 
including but not limited to a merger, acquisition, or 
consolidation, where a new corporate entity succeeds to the 
interests and obligations of the original petitioning employer and 
where the terms and conditions of employment remain the same but for 
the identity of the petitioner.

    Section 314(c)(10) of the INA, 8 U.S.C. 1184(c)(10), as enacted by 
section 401 of

[[Page 80124]]

the Visa Waiver Permanent Program Act. While this new INA provision is 
directed to the INA's processing and adjudication of petitions, we 
consider it to be instructive as to Congress' intent that a 
restructured ``new'' corporate employer be authorized to continue the 
employment of existing H-1B nonimmigrants on the same terms and 
conditions as the ``original'' employer.
    Therefore, the Department's Interim Final Rule, at Sec. 655.730(e), 
provides that a new LCA will not be required merely because a corporate 
reorganization results in a change in corporate identity, regardless of 
whether there is a change in the EIN, provided that the new employing 
entity, prior to the continued employment of the H-1B nonimmigrant, 
agrees to assume the predecessor entity's obligations and liabilities 
under the LCA. The agreement to comply with the LCA for the future and 
assumption of liability for any past violations must be documented with 
a memorandum in the public access file, specifically identifying the 
affected LCAs and the EIN of the new employing entity, and describing 
the new employing entity's actual wage system (see IV.O.3, below). In 
addition, the employer will be required to retain in its records a list 
of the name and job title of each H-1B worker transferred to the new 
employer. It should be noted that the employer's status as a new 
employing entity which is not required to file a new LCA is not 
determined by traditional principles of successorship (although we 
anticipate that the new entity will commonly be a successor employer), 
but rather by the new entity's agreement to undertake the obligations 
and liabilities of the predecessor under the LCA. This position is 
consistent with the assumption of liability under the INA, 8 CFR 
274a.2(b)(1)(viii)(A)(6) and (7), whereby a new employer may either 
assume liability for the old I-9 forms or prepare new ones, and 
provides the employer with flexibility to deal with the circumstances 
surrounding the particular corporate reorganization. These principles 
apply whether the reorganization is as a result of an acquisition, 
merger, sale of stock or assets (``spin-off''), or similar change in 
corporate structure. The Department cautions that an employer which 
undergoes a change in structure and EIN, but chooses not to insert the 
required memorandum in the public access file, is required to file new 
LCAs.
    A new LCA (and H-1B petition) will be required if the H-1B worker 
changes jobs or where the new entity/employer seeks to hire a new H-1B 
worker or to extend an existing H-1B petition. Thus the ``new'' 
employer may not utilize H-1B ``slots'' left over from the previous 
entity's LCA for a worker hired after a reorganization or 
restructuring. The Department also understands that where there is a 
material change in duties (whether or not there is a change in 
occupation), INS may require the filing of a new H-1B petition.
    The Department emphasizes that a change in a corporation's H-1B-
dependency status as a result of a change in the corporate structure 
would have no effect on the employer's obligations with respect to its 
current H-1B workers. In other words, a corporation which was H-1B-
dependent, and as a result of a change in structure becomes non-
dependent, would be required to continue to comply with the secondary 
displacement attestation unless it chooses to file a new LCA and H-1B 
petition(s) for any H-1B worker(s) employed pursuant to the 
``dependent'' LCA. Similarly, a non-dependent corporation which becomes 
dependent as a result of corporate restructuring would not be required 
to comply with the H-1B-dependent employer obligations for H-1B workers 
employed pursuant to a pre-existing LCA, provided the employer has 
assumed the obligations and liabilities of that LCA. Furthermore, as 
discussed, a new LCA (attesting to the newly acquired H-1B-dependent or 
non-dependent status) would have to be filed for all future H-1B 
petitions and extensions of status.

B. What Is an H-1B Dependent Employer or a Willful Violator? 
(Sec. 655.736(a) and (f))

    The ACWIA requires non-displacement and recruitment attestations by 
``H-1B dependent employers'' and by employers found, after the date of 
ACWIA's enactment, to have committed a willful violation or a 
misrepresentation of a material fact on an LCA during the five-year 
period preceding the filing of an LCA.
    The ACWIA definition of ``H-1B-dependent employer'' provides a 
formula for comparing the number of H-1B nonimmigrants employed to the 
total number of full-time equivalent employees (FTEs) in the employer's 
workforce. The Act provides that an H-1B-dependent employer is one that 
employs in the United States:
     25 or fewer FTEs, and more than seven H-1B nonimmigrants; 
or
     At least 26 but not more than 50 FTEs, and more than 12 H-
1B nonimmigrants; or,
     At least 51 FTEs, and H-1B nonimmigrants in a number that 
is equal to at least 15 percent of the number of such FTEs.
    Thus, the H-1B-dependency formula for all employers uses two 
dissimilar numbers: the number of H-1B nonimmigrants employed (a ``head 
count'' of all H-1B workers, both full-time and part-time) and the 
number of FTEs (including both H-1B workers and other employees). For 
larger employers (i.e., those with 51 or more FTEs), the computation is 
made with the number of H-1B workers as the numerator and the number of 
FTEs as the denominator; if the ratio is greater than 15 percent, then 
the employer is H-1B-dependent.
    The structure and application of this statutory definition was 
addressed by one commenter (Tata Consultancy Services (TCS)), which 
urged the Department to focus on the perceived purpose rather than the 
language of the statutory test. TCS described itself as the largest and 
oldest software consulting and development firm in Asia, employing some 
12,000 workers hired and trained in India, and conducting business in 
the U.S. through contracts to provide services both at client locations 
and at TCS locations. TCS expressed concern that ``the Act and the 
Department's proposals literally include TCS as an H-1B dependent 
employer, since the number of TCS employees on H-1B visas is more than 
15 percent of TCS' employees in the United States.'' While 
acknowledging that it is an H-1B-dependent employer under the literal 
language of the statute (and thus subject to the additional attestation 
obligations for such employers), TCS urged the Department to issue a 
regulation which focused not on the express statutory provision but 
rather on the intention of Congress to impose the new obligations on 
``job shops.'' In TCS's view, its own operation should not be included 
in the definition of H-1B-dependent employer because its operation does 
not constitute a ``job shop,'' which it defines as companies which 
``seek only to make money from the temporary placement of foreign 
personnel with respect to whom the job shoppers have no real employer/
employee relationship.''
    The Department has considered the TCS suggestion but has concluded 
that the regulation must reflect the express language of the ACWIA 
definition. There being no ambiguity in this provision, the Department 
has no authority to promulgate a regulation defining a ``job shop'' and 
substituting that definition for the mathematical computation 
prescribed in the statutory definition of ``H-1B-dependent employer.''
    The ACWIA specifies that ``exempt H-1B nonimmigrants'' are not to 
be included in the employer's determination of its H-1B dependency

[[Page 80125]]

status during a certain period after enactment of the Act (i.e., six 
months from the date of enactment (thus, until April 21, 1999), or 
until the date of the Department's final rule on this provision is 
issued (thus, the date of this Interim Final Rule)).
    None of the comments on the H-1B-dependent employer issues 
addressed the limited exclusion of ``exempt'' H-1B workers from the 
determination of H-1B-dependency. The prescribed period for this 
limited exclusion expires with the issuance of this Rule, and all 
``exempt'' H-1B workers are henceforth to be included in the employer's 
determination of H-1B-dependency status. Therefore, the Department has 
determined that it is not necessary or appropriate to include in this 
section of the regulation any language concerning this now moot limited 
exclusion for ``exempt'' H-1B workers.
    As stated above, the new non-displacement provisions and 
recruitment requirements contained in the ACWIA also apply to employers 
found, after the date of ACWIA's enactment, to have committed a willful 
violation or misrepresentation during the five-year period preceding 
the filing of an LCA. Section 655.736(f) of the Rule provides that an 
employer who is a ``willful violator'' is one who is found in either a 
Department of Labor proceeding pursuant to these regulations, or a 
Department of Justice proceeding pursuant to section 212(n)(5) of the 
INA as amended by the ACWIA, 8 U.S.C. 1182(n)(5), to have committed 
either a willful failure to comply with the requirements of Section 
212(n) or a misrepresentation of material fact during the five-year 
period preceding the filing of the LCA in question. Furthermore, the 
final decision in the proceeding finding willful violation or a 
misrepresentation must have been entered on or after the date of 
enactment of the ACWIA. ``Willful failure'' is defined in accordance 
with the existing regulations at Sec. 655.805(b).
    The following discussion addresses the other matters raised in the 
NPRM and in the comments, including the meaning of ``FTE,'' the manner 
and time of determining H-1B-dependency status, documentation of the 
determination, and the designation(s) to be made on the LCA regarding 
an employer's status as an H-1B-dependent employer or a willful 
violator.
1. What Is a ``Full-Time Equivalent Employee''? (Sec. 655.736(a)(2))
    The ACWIA definition of ``H-1B-dependent employer'' includes the 
term ``full-time equivalent employees'' (FTEs) as a critical part of 
the calculation to determine an employer's H-1B-dependency status. The 
term is not defined in the Act.
    The NPRM explained that the Department considered various 
interpretations of the term ``full-time equivalent,'' some of which 
would significantly increase an employer's paperwork burden. The NPRM 
recognized that an employer's FTEs would include only its employees 
(both H-1B nonimmigrants and U.S. workers) and would not include bona 
fide consultants and independent contractors who do not meet the 
employment relationship test under the common law. The NPRM also 
recognized that the determination of the number of FTEs would need to 
include consideration of both the employer's full-time employees and 
its part-time employees (if any).
    The Department pointed out that one possible approach to the FTE 
determination--presumably the most burdensome approach, from the 
employer's perspective--would be to maintain records of all hours of 
work by all employees (both hourly-paid and salaried workers, both 
full-time and part-time workers) during a certain period of time (e.g., 
a year, a work week), and to divide that total by a number of hours 
constituting a full-time employee standard.
    The Department proposed a less onerous approach, in which FTEs 
could be determined in a two-step process. First, the number of 
employees would be determined through the employer's quarterly tax 
statement (or similar document) (assuming there is no issue as to 
whether all employees are listed on the tax statement). Second, the 
employer would count its full-time workers using some standard 
threshold; each full-time worker would constitute one FTE. The 
employer's standard for full-time employment would be accepted, 
provided it was no less than 35 hours per week (or, where the employer 
has no standard, 40 hours per week). Third, the employer would 
aggregate its part-time employees into FTEs by identifying the workers' 
average number of hours of work per week, then aggregating these 
average weekly hours, and finally dividing that total by the employer's 
standard for full-time employment. The aggregation of the average hours 
of the part-time workers into FTEs would be made through an examination 
of the last payroll (or the payrolls over the previous quarter if the 
last payroll is not representative) or through other evidence as to 
average hours worked by part-time employees (such as evidence of their 
standard work schedule).
    Thirteen commenters responded to the Department's proposal and 
offered alternatives for determining FTEs.
    Four commenters addressed issues concerning the identification of 
``employees.'' Three commenters (ACIP, AILA, SHRM) expressed concern at 
what they viewed as the NPRM's inappropriate inclusion of consultant 
and contractor personnel in the determination of FTEs based on 
``indicia of an employment relationship'' with the employer. The 
commenters asserted that this approach was inconsistent with the 
statute, that the determination of FTEs should include only those 
persons whom the employer considered to be its employees, and that the 
application of an ``indicia'' test to all personnel including 
consultants and contractors would be burdensome. ACIP stated that the 
application of the test would be inconsistent with the NPRM proposal 
that FTEs be calculated by examining the employer's quarterly tax 
statements to determine the number of employees on the payroll; ACIP 
noted that consultants and contractors would not appear on these tax 
statements. The commenters suggested that the identification of 
``employees'' for purposes of the determination of FTEs should be a 
simple head count of workers on the employer's payroll (i.e., persons 
identified by the employer on these records as its employees).
    On the related matter of the proposed sources of information as to 
the number of employees--the employer's payrolls and tax statements--
the AFL-CIO recommended that the FTE determination use an average of 
the number of employees shown on the employer's last three quarterly 
tax returns, and not the last quarterly return and the last payroll 
period, because this averaging process would prevent employers from 
timing the filing of LCAs to coincide with a greater ratio of FTEs to 
H-1B workers so as to avoid H-1B-dependency status.
    It appears to the Department that some commenters' assertions 
regarding ``indicia of employment'' are based on a misapprehension of 
one aspect of the proposal. The NPRM did not propose that an ``indicia 
of employment'' test would be applied in this context; the ``indicia'' 
test was created in the ACWIA for purposes of the secondary 
displacement prohibition. The NPRM stated that the common law test of 
``employment relationship'' would be used in identifying the persons to 
be included as ``employees'' in the FTE computation, and that bona fide 
consultants and independent contractors would be excluded from the 
count. The Department is of the view

[[Page 80126]]

that it is not necessary for the employer to do a detailed analysis of 
application of the common law test to every worker in order to identify 
``employees'' for purposes of FTE determinations. Instead, as indicated 
in the NPRM and supported by the commenters, the employer's existing 
identifications of workers as ``employees'' (as opposed to consultants 
or contractor personnel) will ordinarily be sufficient for this purpose 
and no additional analysis will be needed.
    Thus, the Interim Final Rule, at Sec. 655.736(a)(2)(i), provides 
that the determination of FTEs is to include those persons who are 
consistently treated by the employer as ``employees'' for all purposes, 
including payroll records and Internal Revenue Service statements. The 
determination of FTEs is not to include those persons who are 
consistently treated by the employer as consultants or independent 
contractors for all such purposes, and for whom the employer fills out 
IRS Form 1099, provided there is no issue as to whether this treatment 
is bona fide. For any persons who are not consistently treated as 
either employees or consultants/contractors, the facts and 
circumstances must be examined in accordance with the common law test 
for an employment relationship with the employer. The common law test 
is the required standard for this analysis, since the Act does not 
prescribe a standard and, as a matter of law, the common law test 
applies. See, Nationwide Mutual Insurance Co. v. Darden, 503 U.S. 318 
(1992); Community for Creative Non-Violence v. Reid, 490 U.S. 730 
(1989). The Department notes that all H-1B workers are necessarily 
employees within the meaning of the INA, and therefore must be included 
in both the numerator and the denominator of the dependency 
determination.
    Similarly, the Department is of the view that it is not necessary 
for an employer to compute an average number of ``employees'' based on 
a series of quarterly tax statements. The Department agrees with the 
AFL-CIO that it would be desirable to foreclose the possibility of 
potential abuse of the program by employers who have significant 
fluctuations in the numbers of ``employees'' and who might time their 
LCA submissions based on tax statements with ``employee'' numbers 
supporting non-H-1B-dependency status. However, the Department has 
concluded that the imposition of an averaging/computation burden on all 
employers would be an inappropriate means of foreclosing the 
possibility of an unknown--but presumably very small--number of abusive 
filings. The Department cautions that, where it appears that an 
employer has manipulated its employment numbers to avoid dependency 
just prior to filing LCAs or H-1B petitions, the Department will 
examine the situation closely and utilize an employer's normal payroll. 
Further, with regard to the use of quarterly tax statements, the 
Interim Final Rule also clarifies that after determining which workers 
are ``employees,'' it will be necessary in determining FTEs to separate 
those employees who are part-time, do a separate FTE determination for 
those workers, and then add those FTEs to the number of full-time 
workers to determine total FTEs.
    One commenter (ITAA) objected to the Department's proposal to count 
all H-1B nonimmigrants (both full-time and part-time) in the numerator 
of the equation to calculate H-1B-dependency. ITAA suggested that, for 
fairness and mathematical accuracy, the regulation should be written so 
that part-time H-1B workers are counted in the numerator in the same 
manner as part-time employees are counted in the denominator. 
Similarly, AILA argued that whether the regulation uses a simple head 
count or a calculation of FTE taking into consideration part-time 
hours, there should be consistency in counting workers for both the 
numerator and the denominator.
    The Department has considered these suggestions, but has concluded 
that they cannot be accepted because the statutory language requires 
the difference in counting as described in the NPRM. The ACWIA 
prescribes the computation of ``full-time equivalent employees'' for 
the entire workforce, and explicitly requires that the number of FTEs 
be compared to the number of ``H-1B-nonimmigrants'' (with no 
distinctions as to full-time or part-time status).
    Nine commenters addressed the matter of determining what 
constitutes a full-time worker for purposes of computing the employer's 
FTEs. Three commenters (AILA, Hammond & Associates (Hammond), and 
Latour) recommended that ``full-time'' be determined by individual 
employers consistent with their standards and business practices. Five 
commenters (ACIP, Intel Corporation (Intel), Kirkpatrick & Lockhart 
(Kirkpatrick), Rapidigm Immigration Services (Rapidigm), and American 
Occupational Therapy Association (AOTA)) supported the NPRM proposal 
that the employer should use its payroll and tax records to count the 
number of workers it employs on a full-time basis, using some standard. 
However, these comments differed with regard to the appropriate 
benchmark for full-time hours (e.g., 35 hours per week, 32 hours or 
more per week, 21 hours or more per week). Two commenters (AILA and 
Hammond) asserted that employers may be able to document that full-time 
work is a figure less than the 35 hours per week suggested in the NPRM. 
Two commenters (AOTA and American Physical Therapy Association (APTA)) 
suggested that the Department set a numerical standard for part-time 
employment and that all employees with hours above that standard be 
considered full-time.
    After fully considering the comments, the Department has concluded 
that the NPRM proposed definition of full-time will be adopted since it 
provides considerable flexibility for employers while incorporating a 
reasonable and appropriate baseline standard. Thus, the Interim Final 
Rule, at Sec. 655.736(a)(2)(iii)(A), provides that the employer may use 
its own standard for full-time employment, which the Department will 
accept provided that the standard is no less than 35 hours of work per 
week. The Department believes that this is a reasonable approach, that 
it is easily understood and applied, and that 35 hours as the minimum 
for full-time employment is a well-established labor standard, utilized 
by the Bureau of Labor Statistics for survey purposes. See, e.g., the 
definitions of the terms utilized in U.S. Bureau of Labor Statistics, 
Employment and Earnings. This standard is the equivalent of seven hours 
of work per day, five days per week, with non-working time for lunch 
each day. The Rule also provides that, where the employer has no 
standard for full-time employment, the Department in an enforcement 
action will use the standard of 40 hours of work per week (the Fair 
Labor Standards Act standard).
    Four commenters (ITAA, ACIP, AILA and SHRM) expressed concerns as 
to the need for and the methodology of aggregating part-time workers 
into FTEs for purposes of determining the employer's H-1B-dependency 
status. ACIP and SHRM suggested that no such aggregation or 
``conversion'' should be required, and stated that the method proposed 
by the Department was burdensome, complex and unworkable. ITAA stated 
that the proposal would be burdensome because many part-time workers 
are salaried with no records of hours of work. AILA considered the 
proposed method to be burdensome, and offered its own proposed formula 
for calculation of FTEs--each full-time worker, each FLSA-exempt 
worker, and each part-time worker working more

[[Page 80127]]

than 20 hours per week would equal one FTE; part-time workers who work 
fewer than 20 hours per week and are not FLSA-exempt would be 
aggregated through an average of hours as proposed in the NPRM.
    The Department recognizes that, for some employers, the aggregation 
of part-time workers into FTEs may be somewhat burdensome. However, in 
light of the clear statutory language, the Department is unable to 
dispense with the concept of ``full-time equivalent employees,'' which 
is not a mere head-count of workers in the workforce (number of 
employees) but instead is a calculation of the number of full-time 
workers needed to perform the total work done by the total workforce 
(number of ``equivalents'' of full-time workers). Congress explicitly 
prescribed the use of the FTE concept at three points in the ACWIA, and 
must be presumed to have used the concept with an understanding of its 
established meaning. The concept of ``full-time equivalent employees'' 
is well-known to Congress. For example, Congress considers FTEs each 
year in the enactment of the appropriations of operating funds for the 
Federal agencies, which submit their budget requests based on the 
Office of Management and Budget definition of FTEs:

``* * * the total number of regular straight-time hours (i.e., not 
including overtime or holiday hours) worked by employees divided by 
the number of compensable hours applicable to each fiscal year. 
Annual leave, sick leave, compensatory time off and other approved 
leave categories are considered to be ``hours worked'' for purposes 
of defining full-time equivalent employment that is reported in the 
personnel summary.''

Office of Management and Budget, Circular No. A-11 (1998), p. 31. As 
stated in the NPRM, the Department considered but rejected the 
comprehensive computation that would be required under the OMB 
definition (i.e., totaling all hours worked by all workers, and 
dividing by the normal standard of hours of work for a full-time 
worker); this approach could be extremely burdensome to employers. But 
the Department recognizes that some computation of FTEs--including a 
computation regarding part-time workers--was mandated by the ACWIA and 
must be reflected in the dependency computation.
    In an effort to minimize the burden to employers, as suggested by 
SHRM and other commenters, the Department has modified its proposed 
method for the aggregation or conversion of part-time workers into 
FTEs. The Interim Final Rule, at Sec. 655.736(a)(2)(iii)(B), provides 
the employer a choice between two methods. First, the employer may 
count each part-time worker (i.e., each employee working less than a 
full-time schedule) as one-half of an FTE. This method requires no 
records of hours of work and no complex calculations; the employer 
simply counts the number of part-time workers and divides by two to 
arrive at the number of FTEs represented by its part-time workers. In 
the alternative, the employer may total the hours worked by all the 
part-time workers in a work week and divide that total by the standard 
hours for full-time employment (e.g., 40 hours). The Department notes 
that the use of this alternative does not require the employer to have 
hours-worked records for its part-time workers; rather, the employer 
may use any reasonable method of approximating the average hours worked 
by its part-time workers, such as their standard work schedule.
    One commenter (AILA) suggested that the regulations enable 
employers to avoid any complicated calculation whatsoever where it is 
``readily apparent'' that an employer is not H-1B dependent based on 
the make-up of its work force. AILA stated that an employer should be 
allowed a ``safe harbor'' when a quick, simple and straightforward 
calculation shows non-dependency. It suggested a calculation: the 
number of H-1B workers would be divided by the number of full-time 
employees; if the result is less than 15 percent, no further or 
detailed computation would be necessary, but if the result is greater 
than 15 percent, the employer would calculate its FTEs to determine its 
H-1B-dependency status. Rapidigm and ACIP agreed that a test should be 
provided for ``readily apparent'' status.
    The Department agrees with the suggestion that there should be a 
simple method for determining whether the employer's status as either 
H-1B-dependent or non-dependent is ``readily apparent.'' The NPRM 
stated the Department's belief that, for most employers, dependency 
status would be ``readily apparent'' and, therefore, they would not 
need to make a calculation of their FTEs in order to be able to attest 
to their status. The Department, in Sec. 655.736(c)(1) and (2) of this 
Interim Final Rule, is adopting a provision which requires no 
computations by the employer with ``readily apparent'' status, and is 
also adopting the AILA-recommended 15 percent ``snap shot'' test as the 
means for an employer with borderline status to determine whether it 
must engage in the full computation of the number of FTEs in its work 
force in order to determine its H-1B-dependency status. The ``snap 
shot'' test allows small employers (i.e., those with 50 or fewer 
employees in the U.S.) to simply compare their work forces to the 
definition for H-1B-dependent employer, counting all employees rather 
than computing FTEs. If such an employer appears to be H-1B-dependent 
based on the snap shot test, then the employer which believes itself to 
be non-dependent should make a complete computation. The snap shot test 
provides that large employers (i.e. those with 51 or more employees in 
the U.S.) may make a quick appraisal of the proportion of H-1B 
nonimmigrants in their work force. Where the number of H-1B workers 
divided by the number of full-time employees is greater than 0.15, any 
employer which has reason to believe it may not be H-1B-dependent (for 
example, because of the number of part-time workers in its work force), 
must calculate its FTEs. The employer whose ``snap shot'' clearly shows 
it is not H-1B-dependent, as well as any employer which admits it is 
dependent, may file its LCA(s) reflecting that status (as described in 
the following discussion), without engaging in further computations. In 
the event of an enforcement action, the employer may be required to 
verify its ``snap shot'' results and its H-1B-dependency status through 
available records (as discussed in IV.B.3 below).
2. When Must an Employer Determine H-1B Dependency? (Sec. 655.736(g))
    The ACWIA definition of ``H-1B-dependent employer'' and the new LCA 
attestation elements that are required of such an employer do not 
clearly define the timing of the dependency determination. The 
questions therefore arise: When must a new LCA be filed and what 
obligations, if any, does an employer have if its dependency status 
changes?
    The Department, in the NPRM, expressed concern that if H-1B-
dependent employers are permitted to continue to use LCAs certified 
before this Rule is effective, they could avoid any application of the 
law's new attestation provisions (which are applicable only to LCAs 
filed after the issuance of this Rule and before October 1, 2003 (the 
``sunset'' date as extended by the October 2000 Amendments). An LCA is 
ordinarily valid for up to three years from its date of certification 
by ETA and can provide for numerous H-1B nonimmigrants to be hired 
during that period. Thus an employer could use a previously-certified 
LCA to bridge the entire period during which the new LCA attestation 
elements would be required. H-1B-dependent employers could, in effect, 
disregard all of the new

[[Page 80128]]

worker protection provisions, with the potential effect of nullifying 
these provisions.
    The Department proposed that, by operation of the regulation, any 
current LCA(s) would become invalid for an employer that is or becomes 
H-1B-dependent, for purposes of any future H-1B petitions (including 
extensions). The employer's previously certified LCA(s) would continue 
to be valid, however, and the obligations under that LCA(s) would 
continue with respect to any petitions filed before the effective date 
of these regulations (i.e., pending petitions would not be affected). 
Thus, the Department proposed that the regulation would require that 
all H-1B-dependent employers with existing LCAs file new LCAs if they 
wish to petition for any new H-1B nonimmigrants or seek extensions of 
any existing H-1B visas on or after the effective date of the Rule. 
Likewise, the Department proposed that the regulation would require all 
non-dependent employers that experience a change of status (becoming H-
1B-dependent) to file new LCAs if they wish to petition for new H-1B 
nonimmigrants or seek extension of existing H-1B visas after the date 
they become H-1B-dependent. The proposal contemplated that non-H-1B-
dependent employers whose status remained unchanged would not be 
required to file new LCAs.
    The NPRM discussed the timing and frequency of employers' 
determinations of their H-1B-dependency or non-dependency status. The 
Department recognized that the make-up of an employer's workforce--and, 
thus, its H-1B-dependency status--could change significantly over time. 
The Department therefore suggested that an employer's status would need 
to be redetermined at appropriate times, and reflected in the 
employer's actions, in order for the new LCA obligations to be 
appropriately implemented. The Department proposed that an employer 
would be required to make a determination of its status not just prior 
to or on the effective date of the regulation, but also when it files 
any new LCA or H-1B petition (including extensions) after that date. 
Thus a non-dependent employer (i.e., one which is not H-1B-dependent on 
the effective date of the Interim Final Rule or at the time an LCA is 
filed) would have a continuing obligation to ensure that, if it later 
becomes dependent and wishes to file new H-1B petitions (or seek 
extensions), it takes steps necessary to comply with the requirements 
of the law and the regulation. The NPRM further stated that an employer 
which is H-1B-dependent and files an LCA indicating that status, but 
later becomes non-dependent, would not be required to comply with the 
attestation elements applicable to dependent employers with respect to 
any H-1B workers during any period in which it is not dependent.
    The Department also described alternative approaches to the 
proposed timing of dependency determinations, such as having the 
dependency update determined on a set, regular basis (e.g., each 
calendar quarter) or limiting the LCA's validity period to some period 
shorter than the current three years (e.g., 90 or 180 days), with a new 
dependency status determination made in connection with each new LCA.
    The NPRM explained that the Department believed that, as a 
practical matter, the continuing obligation of the non-dependent 
employer to ensure that its dependency status has not changed would not 
place an undue burden on employers. For most program users, their 
status as non-dependent would be readily apparent and they would have 
no obligations to perform the full computations or to file new LCAs. 
(See discussion of ``readily apparent'' status in IV.B.1, above).
    The statements by Senator Abraham and Congressman Smith in the 
Congressional Record are silent regarding the effect of the ACWIA 
provisions on existing LCAs. Both Senator Abraham and Congressman Smith 
simply state, regarding the effective date, that the provisions are 
effective on the date the Secretary issues final regulations to carry 
them out. 144 Cong. Rec. S12752 (Oct. 21, 1998); 144 Cong. Rec. E2325 
(Nov. 14, 1998).
    Sixteen commenters responded to various aspects of these NRPM 
proposals.
    Eleven commenters addressed the Department's proposal to invalidate 
the LCAs of H-1B-dependent employers for purposes of petitions for new 
or extended visas. Four commenters (Senators Abraham and Graham, AILA, 
ITAA, and Baton Rouge International, Inc. (BRI)) challenged the 
Department's authority to invalidate LCAs already in effect. Senator 
Abraham stated that Congress specified in ACWIA that the new 
attestation requirements would apply only to LCAs filed on or after the 
date of the Department's final regulations. Three of these commenters 
(BRI, AILA and ITAA) also asserted that the proposed rule would be 
invalid as retroactive rulemaking.
    An attorney (Hammond) acknowledged the Department's reasons for its 
proposal as legitimate and did not challenge the Department's authority 
to invalidate existing LCAs; but questioned the proposal because of the 
paperwork and processing burden on the Department and the INS. Hammond 
recommended that, instead of invalidating the previously-certified LCA, 
the Department and INS should require an affidavit, mirroring the 
dependent employer attestations, on any new petitions filed using 
``old'' LCA forms. Hammond further recommended that the proposed 
invalidation of existing LCAs be phased in over a six-month period. 
Another attorney (Latour) acknowledged that while the proposal was 
burdensome, there seemed to be no attractive alternative to requiring 
H-1B-dependent employers with existing LCAs to file new LCAs for the 
purpose of filing new H-1B nonimmigrant petitions. Another commenter 
(Simmons, Ungar, Helbush, Steinburg & Bright (Simmons, Ungar)) also 
recommended a phase-in period and suggested a three- to six-month 
window for filing new LCAs; this commenter expressed concern that the 
requirement of immediate new LCAs would lead to significant disruptions 
in ongoing critical projects.
    The Department has carefully considered the views of the commenters 
who asserted that the proposed rule would be contrary to the meaning of 
the statute or invalid as retroactive rulemaking, but disagrees with 
their conclusions. To the contrary, the proposed rule is not 
inconsistent with the language of the ACWIA. The Act makes the new 
attestation elements apply to ``an application filed on or after the 
date final regulations are first promulgated to carry out this 
[provision], and before October 1, 200[3]'' (the ``sunset'' date having 
been extended from 2001 until 2003 by the October 2000 Amendments). The 
ACWIA is silent regarding the timing of the employer's determination of 
its dependency status or the effect of the ACWIA on previously 
certified LCAs, leaving a gap to be filled by these rules. See Chevron 
v. Natural Resources Development Council, 467 U.S. 837, 842-43 (1984). 
The proposed rule would require an employer to make that determination 
when and if it seeks access to new H-1B workers or wishes to extend 
their stay in the United States; if the employer then determines it is 
H-1B-dependent, it would be required to file a new LCA. Under the ACWIA 
language, such new LCAs would be subject to the new attestation 
elements.
    Given the significance of the new attestation requirements in the 
ACWIA, we believe it is reasonable for the Department to avoid the 
nullification of these requirements by issuing regulations which 
require employers to make dependency determinations if they choose to 
file new H-1B petitions

[[Page 80129]]

or apply to extend existing visas after the effective date of these 
regulations. B-West Imports, Inc. v. U.S., 880 F. Supp. 853, 863 (Ct. 
Int'l Trade 1995), aff'd, 75 F.3d 633 (Fed. Cir. 1996). In this 
connection, the Department notes that it has reviewed LCAs filed since 
the effective date of the ACWIA, and found that many employers filed 
LCAs for numerous H-1B workers. A list of the 20 users in each region 
which filed LCAs for the greatest number of aliens in the period 
October 1, 1998 through May 31, 1999, showed the average number of 
workers per LCA ranging from one worker per LCA to more than 500 per 
LCA. Out of the top 20 users in Region I (Boston), for example, only 
three employers averaged less than 10 workers per LCA, while eight 
averaged 50 or more per LCA, of whom four averaged 100 or more. This 
data supports the Department's view that--given the limited time these 
recruitment and non-displacement obligations will be in effect and the 
three-year validity period of the LCAs--this requirement is necessary 
to effectuate the worker protection provisions applicable to H-1B-
dependent employers and willful violators.
    It is also the Department's view that the regulation would not be 
invalid as retroactive rulemaking. The rule does not create a new 
obligation, impose a new duty or attach a new disability with respect 
to transactions already taken. See, Landgraf v. USI Film Products, 511 
U.S. 244, 269 (1994). The regulation does not change the standards or 
consequences, or require adjustments or corrections, for completed 
transactions. The H-1B visas under previously certified LCAs remain 
valid and in effect, and the prevailing wage and other obligations 
under that LCA continue to apply to those visas. New LCAs are required 
only for H-1B-dependent employers and willful violators filing new H-1B 
petitions or applications for extension of existing visas. See 
Association of Accredited Cosmetology Schools v. Alexander, 979 F.2d 
859, 865 (D.C. Cir. 1992). Nor does the rule impair vested rights. See 
Landgraf v. USI Film Products, 511 U.S. at 269-71. Furthermore, the LCA 
itself is only the first step by an employer in applying for H-1B 
visas, and for workers in seeking to enter the United States. Even 
after the LCA is certified, the employer has no vested right to hire H-
1B nonimmigrants; the nonimmigrant in turn has no vested right, once 
the petition is granted, to obtain a visa or to enter the country. 
Joseph v. Landon, 679 F.2d 113, 115 (7th Cir. 1982). See Pine Tree 
Medical Associates v. Secretary of Health and Human Services, 127 F.3d 
118, 122 (1st Cir. 1997).
    The Department wishes to emphasize that an LCA certified prior to 
this Rule will continue in effect for the vast majority of program 
users who are not H-1B-dependent. Furthermore, such LCAs will remain in 
effect for H-1B-dependent employers and willful violators except that 
they may not be used to support new H-1B petitions or applications for 
extension of status. Thus, for example, the prevailing wage rate and 
obligation under the ``old'' LCA would remain in effect even for H-1B-
dependent employers and willful violators with respect to any H-1B 
workers supported by the ``old'' LCA. A new LCA (and new wage rate) 
would be necessary only where an H-1B-dependent employer wants to 
petition for new workers or request extensions for existing workers 
(who would typically require a new LCA in any event).
    The Department has also considered the suggestion by some 
commenters that the requirement of new LCAs be phased in over some 
period of weeks or months following the issuance of this rule. However, 
the Department is confined by the ACWIA language prescribing that the 
obligations are effective for LCAs that are filed on or after the date 
this rule is promulgated. Further, the Department is aware that the new 
attestation elements will be effective only with respect to LCAs that 
are filed during a relatively short period (i.e., until October 1, 
2003, the ``sunset'' date as extended by the October 2000 Amendments). 
We have, therefore, concluded that it would be contrary to the language 
and purposes of the legislation to provide an additional phase-in 
period which would have the effect of restricting an already limited 
period for the application of the new attestation elements. The 
Department notes that employers have already had considerable time to 
prepare for the ACWIA provisions since their enactment on October 21, 
1998, and the publication of the NPRM on January 5, 1999.
    The Department understands that INS plans to modify its petition 
form to obtain information about a petitioner's H-1B-dependency status, 
and in its adjudication of H-1B petitions, will review LCAs filed by 
dependent employers to ensure that the LCA reflects the employer's 
status as set forth on the petition. Thus, it is the Department's 
expectation that if a dependent employer seeks to support an H-1B 
petition with an LCA which does not identify itself as H-1B-dependent 
and attest to the new attestation elements for dependent employers, INS 
will advise the employer that it must obtain a new LCA.
    Nine commenters addressed the Department's proposal concerning the 
timing or frequency of the employer's determination of its H-1B 
dependency status.
    One commenter (AILA) supported the Department's proposal that the 
dependency determination be made each time an LCA is used by the 
employer in support of an H-1B petition. Four commenters (AFL-CIO, 
AOTA, APTA, and AILA) supported requiring that employers determine 
dependency when filing an LCA.
    Five commenters (Intel, Computec International Resources 
(Computec), ACIP, SemiConductor Industry Association (SIA), and ITAA) 
objected to the Department's proposal requiring employers to make 
dependency determinations when filing an LCA or H-1B petition; they 
viewed the requirement as unrealistic and burdensome. SIA and ITAA 
suggested annual dependency determinations. ACIP suggested that 
determinations be made annually or at the time there is a large 
increase in H-1B staff. Intel and Computec suggested that dependency be 
determined on a quarterly basis, and Intel stated its view that an 
employer's dependency will not change from one filing to another.
    Having considered the varying views of the commenters, the 
Department has concluded that the proposed approach is appropriate in 
that it achieves the purposes of the Act while not imposing an 
unreasonable burden. No employer will be required to make a 
determination of its dependency status unless it wishes to file 
petitions for new workers or to seek extension on the visas of existing 
workers (i.e., the determination is required only when an employer 
seeks access to H-1B workers, on either new visas or extended visas--
which typically require a new LCA in any event). The Department 
believes that the vast majority of the employers using the H-1B program 
are non-dependent and that for both dependent and non-dependent 
employers, their status would be readily apparent (see discussion of 
``snap shot'' determination in IV.B.1, above). Further, the Department 
anticipates that the status of most employers would be unlikely to 
change, whether that status be dependent or non-dependent. At the same 
time, however, the Department considers the new attestation provisions 
to be important and believes the purposes of these provisions cannot be 
satisfied if an employer is permitted to continue to use an LCA for 
non-

[[Page 80130]]

dependent employers if its status changes.
    Three commenters responded to the Department's alternative 
suggestion that the validity period of an LCA might be shortened from 
the current rule's maximum period of three years. The AFL-CIO 
recommended that the LCA validity period be shortened to six months. 
AOTA recommended a quarterly (three-month) filing requirement. BRI 
opposed the reduction of the LCA validity period, asserting that 
quarterly or semi-annual LCAs would overburden and backlog 
administering agencies.
    The Department considered the comments pertaining to the 
possibility of reducing the validity period of the LCA. However, we see 
no advantage that would outweigh the significant increase in the burden 
on employers and government agencies due to the repeated submissions of 
new LCAs upon the expiration of short-lived LCAs. Therefore, the 
Interim Final Rule does not make any reduction of the LCA validity 
period of three years.
    After consideration of all these comments, the Interim Final Rule, 
at Sec. 655.736(c) and (g), adopts the proposal that H-1B-dependent 
employers be required to file a new LCA if they wish to file new H-1B 
petitions, or extensions of status, after the effective date of the 
regulations. In addition, if a non-dependent employer becomes dependent 
after the effective date of the regulations and wishes to file new H-1B 
petitions or extensions of status, it must file a new LCA attesting 
that it is dependent and agreeing to the new attestation requirements 
for H-1B-dependent employers. Thus an employer must consider and attest 
to its dependency status each time it files a new LCA; similarly, as 
discussed below, an employer seeking to file a new H-1B petition, or 
seeking an extension of status, must use an LCA in support of the 
petition that accurately attests as to its dependency status at the 
time it files the petition. An H-1B employer that changes its status to 
non-dependent but wishes to petition for additional H-1B nonimmigrants 
or extensions of stay using an approved ``dependent'' LCA continues to 
be bound by the dependent-employer attestation requirements unless it 
files a new LCA attesting to its non-dependency.
3. What Kind of Records are Required Concerning the H-1B Dependency 
Determination? (Sec. 655.736(d))
    The Department, in the NPRM, discussed the issue of what records, 
if any, the employer would be required to create and retain concerning 
its dependency determination(s). The Department proposed that 
documentation be created and retained only when an employer's non-
dependent status is not readily apparent. On the other hand, the 
Department also proposed that if the employer's dependency status is 
``readily apparent'' (either dependent or not dependent), no records 
would need to be made or retained. The Department sought comments on 
whether there should be an explicit standard for when the employer's 
status is ``readily apparent.'' (See discussion of ``snap shot'' 
determination in IV.B.1, above). Further, the Department proposed that 
if the employer's dependency status changes, the employer should retain 
records in the public access file reflecting the change and, if the 
change of status is from dependent to non-dependent, the public access 
file must show the underlying computation. Finally, the Department 
requested comments on the feasibility and appropriateness of the 
regulation specifying that no records are required if the dependency 
determination could be made from publicly available records and, if so, 
what public records are generally available for this purpose.
    The Department received 13 comments on these proposals.
    Kirkpatrick & Lockhart, Latour and AOTA supported the NPRM 
proposals. The AFL-CIO, Rubin & Dornbaum, and White Consolidated 
Industries suggested that all employers be required to document not 
only their status but also the underlying mathematical computations. 
AILA stated that the Department should not require recordkeeping of the 
calculation by any employer, but especially it should not require non-
dependent employers to retain dependency documentation and keep it in 
public access files. Intel and ACE agreed with the proposal that no 
record needs to be kept where the employer's non-dependent status is 
readily apparent. ITAA suggested that the regulation should prescribe a 
bright line test to show when employers are required to create and 
maintain records, and that no records at all should be required of 
employers that concede that they are H-1B-dependent. ACIP suggested 
that the Department should advise employers how long they are to keep 
records and should allow employers five working days to produce their 
dependency status records in the event of an investigation. Rapidigm 
suggested that the records used to make the dependency determination 
should be made accessible to the Department on a quarterly basis. 
Computec suggested that an employer be required to keep dependency 
records in only one location (apparently based on the misunderstanding 
that public access files must be maintained in numerous locations).
    Having taken into consideration all of the commenters' varied views 
pertaining to the creation and retention of documentation regarding the 
determination of dependency status, the Department has concluded that 
modification of the proposal is appropriate to achieve the purposes of 
the ACWIA while avoiding unnecessary burdens on employers. The 
Department first notes that for the vast majority of employers using 
the H-1B program, their dependency status (either non-dependent or H-
1B-dependent) will be obvious and stable and they, therefore, will have 
no documentation burden; a small number of employers with 
``borderline'' status or changing status will be required to document 
their determinations of status and/or their changes of status, but the 
documentation burden will be minimal.
    The Interim Final Rule requires that employers determine their 
dependency status the first time after the Rule is in effect that they 
file an LCA or an H-1B petition or extension under an existing LCA. 
Employers may use the ``snap shot'' test to determine if their 
dependency status is readily apparent, but must do the full computation 
if the number of H-1B workers divided by the number of full-time 
workers in their workforce is more than 0.15, and must retain a copy of 
the full computation if they then conclude that they are not H-1B-
dependent. The regulations do not require that an employer do the 
computation, but do require that the employer consider its status, each 
time thereafter that an LCA or H-1B petition is filed; the employer 
must attest as to its status on each LCA, and may not use a non-
dependent LCA to support new H-1B petitions or requests for extensions 
if its status changes from non-dependent to dependent. Furthermore, we 
understand that employers will be required to indicate their status on 
each H-1B petition or extension filed with INS. Thus it is important 
that employers remain cognizant of their dependency and do a recheck of 
their dependency status if the make-up of their work force changes 
sufficiently that their status might possibly change.
    If an employer changes status from dependent to non-dependent, the 
employer will be required to retain a copy of the full computation of 
its status. The Interim Final Rule also requires a recheck of 
dependency (whether the ``snap shot'' test or the full

[[Page 80131]]

computation) if there is a change in corporate status, as discussed in 
IV.A, above. In addition, the Rule provides that if an employer 
utilizes the IRC single-employer test to determine dependency, it must 
maintain records documenting what entities are included in the single 
employer, as well as the computation performed (whether the ``snap 
shot'' or full computation), showing the number of workers employed by 
each entity who are included in the numerator and denominator of the 
equation. It is important that such employer retain copies of the 
records necessary to support the computation or be able to provide such 
records in the event of an investigation, since the records may not all 
be under its control. Finally, if an employer includes workers in its 
computation who do not appear as employees on its payroll, the employer 
must keep a record of its computation (whether the ``snap shot'' or the 
full computation) and be able to substantiate its determination that 
the workers are its employees.
    The Department has concluded that it is not necessary, however, to 
include either the computations or a summary of the computations in the 
public access file. The Department believes that the notation on the 
LCAs as to dependency status constitutes the information necessary for 
the public. In addition, the Interim Final Rule, at Sec. 655.736(d)(7), 
requires the employer to include a notation in the public access file 
listing any other entities which are considered to be part of a 
``single employer'' for purposes of the dependency determination. 
Further, all employers are required to retain copies of H-1B petitions 
and requests for extensions filed with INS and to make petitions and 
payroll records available to the Department in the event of an 
investigation.
    The current regulation contains guidance that meets the concerns of 
some commenters pertaining to location of public access files and the 
length of time that records must be retained. Section 655.760(a) 
directs the employer to make a public access file available in either 
of two locations (its principal place of business in the U.S. or at the 
worksite) and describes the required contents of the file. The 
regulation does not mandate a separate file for each H-1B worker or for 
each LCA. If the employer maintains one public access file for all of 
its LCAs, documentation specific to an LCA should be attached to the 
respective LCAs in the file; where documentation is common to all LCAs, 
only one document need be retained in the file. The record retention 
period is set forth in Sec. 655.760(c), which has been clarified to 
require that records be retained for one year beyond the last date on 
which any H-1B nonimmigrant is employed under the LCA or, if no 
nonimmigrants were employed under the LCA, one year from the date the 
LCA expired or was withdrawn. The regulation further requires that 
payroll records be retained for a period of three years from the 
date(s) of the creation of the record(s). If there is an enforcement 
action, records shall be retained until the enforcement proceeding is 
completed.
    With respect to the suggestion that the regulations allow employers 
five working days to produce records as to dependency status, the 
Department believes that such a provision in the regulations is 
unnecessary. Wage-Hour district offices commonly make appointments with 
employers before an investigation commences, thereby allowing employers 
time to produce necessary records. For employers who are required to 
make and retain computations of their dependency status, the Department 
would anticipate that the computations would be provided promptly to 
Wage-Hour. Wage-Hour will allow employers reasonable time to gather 
back-up documentation needed to support the computation, or for Wage-
Hour to make the computation if none has been made by the employer, 
taking into consideration the fact that the statute provides that the 
investigation is to be completed within 30 days.
4. What Information Will Be Required on the LCA Regarding an Employer's 
Status as H-1B Dependent? (Sec. 655.736(e))
    The Department proposed in the NPRM that the revised attestation 
form (LCA), at a minimum, would require that every employer which is H-
1B-dependent at the time it files an LCA, affirmatively acknowledge its 
status and obligations by checking a box on the LCA attesting to its 
dependency and its compliance with the additional attestation 
requirements concerning non-displacement and recruitment of U.S. 
workers. With respect to an employer which is not H-1B-dependent at the 
time it files an LCA, the NPRM set out three alternatives for the LCA 
form:
    1. The employer would expressly attest that it is not H-1B-
dependent and that if it later becomes dependent, it will comply with 
the additional attestation requirements; or
    2. The employer would not have to attest that it is not dependent, 
but the LCA would clearly state--and by signing the form the employer 
would agree--that the employer is required to comply with the 
additional attestation requirements if it does become dependent; or
    3. The employer would not have to attest that it is not dependent, 
but the LCA would clearly state that it could not be used in support of 
any H-1B petition filed after the employer became dependent.
    The NPRM included a draft revision of the LCA form, which included 
a ``box'' for the employer's acknowledgment of H-1B-dependent status 
but no ``box'' regarding non-dependent status. The draft also included 
a ``box'' for the employer to indicate that the LCA would be used only 
for ``exempt'' H-1B workers, as well as a ``box'' for the employer's 
acknowledgment of a finding of a willful violation or misrepresentation 
of material fact.
    Thirty-two commenters, including 20 members of the general public, 
responded to the Department's proposals. The majority of commenters 
endorsed the ``check box'' approach for the LCA and favored the use of 
an LCA form which clearly reflects the employer's status and 
obligations. For example, Intel stated that ``[b]y checking a box, it 
will clearly be evident whether an employer is dependent or non-
dependent.'' The majority of commenters (each of the 20 individuals, 
the AFL-CIO, Kirkpatrick & Lockhart, Latour, the Institute of 
Electrical and Electronics Engineers (IEEE), and the American 
Engineering Association (AEA)) suggested that all employers be required 
explicitly to attest to their status as dependent or non-dependent when 
filing LCAs. Three commenters (APTA, ITAA, and Cooley Godward) endorsed 
NPRM proposed alternative 2. BRI favored either option 1 or option 2. 
ITAA suggested that non-dependent employers should not be required to 
check any boxes, but should be given separate LCA forms. AILA suggested 
that an employer intending to use the LCA only for ``exempt'' H-1B 
workers should be allowed to check a single box indicating that 
intention and not be required to take any action with regard to 
determining H-1B-dependency or marking any boxes on the LCA as to 
dependency status. Several other commenters supported the proposal that 
the LCA should have a method by which the employer could explicitly 
designate that the LCA will be used exclusively for exempt H-1B 
workers. Two commenters (Intel) recommended that employers check one of 
three boxes, but suggested different approaches than those offered in 
the NPRM. Intel

[[Page 80132]]

suggested that employers be given three ``boxes'': (1) Non-dependent; 
(2) Dependent filing for exempt workers; and (3) Dependent filing for 
non-exempt workers. AILA suggested three different ``boxes'': (1) The 
LCA is used only for exempt workers and no additional attestations are 
made; (2) The employer is non-dependent and no additional attestations 
are required; and (3) The employer is H-1B-dependent, the workers 
sought are non-exempt, and the employer makes the additional 
attestations. ACIP suggested that separate LCAs be developed: one for 
non-dependent employers and dependent employers hiring exempt workers, 
and another for dependent employers and willful violators. With regard 
to the employer's history concerning finding(s) of willful violations 
or misrepresentations of material fact, the IEEE urged that there be an 
additional ``box'' by which the employer could attest to the absence of 
such finding(s) (the draft form having only a ``box'' to show that 
there was such a finding).
    The Department has reviewed all of the comments and has determined 
that the proposed regulation and LCA revision will be modified along 
the lines recommended by Intel. In light of the strong views of the 
majority of the commenters, the LCA will require that every employer 
mark a ``box'' to explicitly designate its status as either H-1B 
dependent or non-dependent. The LCA will also provide a ``box'' by 
which an H-1B-dependent employer can designate that it will use the LCA 
only for exempt workers. It is our understanding that if the latter 
``box'' is marked, the INS will examine each petition supported by the 
LCA to determine whether the beneficiary is ``exempt'' (see discussion 
in IV.C, below). After careful consideration, the Department has 
concluded that it would not be appropriate or feasible to allow all 
employers to mark only a ``box'' for exempt workers and then make no 
further determinations or designations as to dependent status as 
suggested by AILA and ITAA, because such an approach would impose an 
unreasonable administrative burden on the INS in examining the exempt 
status of workers employed by the vast majority of employers which are 
non-dependent. The Department believes that the burden of determining 
dependent status under the Interim Final Rule is minimal, especially 
for the vast majority of employers whose status is readily apparent, 
and that it is not unreasonable to require such employers to attest as 
to their non-dependent status.
    In the event that an employer's dependency status changes (either 
to dependent or to non-dependent) after the LCA is filed and the LCA 
therefore no longer accurately reflects that status, a new LCA 
designating the new status would have to be filed if the employer wants 
to seek access to H-1B workers through either new petitions or requests 
for extensions (see discussion in IV.B.2, above). Similarly, an 
employer which attests that it will use an LCA only for exempt workers 
may not use the LCA for non-exempt workers. However, the LCA will 
provide that in the event an employer violates these provisions--by 
utilizing an LCA attesting that it is non-dependent when in fact it is 
dependent, or by utilizing an LCA for non-exempt workers where it has 
attested that it will only be used for exempt workers--the employer 
will be bound by the attestation requirements for dependent employers.
5. What Changes Are Being Implemented on the Labor Condition 
Application Form and the Department's Processing Procedures? 
(Sec. 655.720 and Sec. 655.730)
    In the NPRM, the Department provided advance public notice of an 
anticipated change in the existing system for processing LCAs. Such 
applications were previously required to be submitted by U.S. mail, 
FAX, or private carrier, to one of 10 ETA regional offices, as 
delineated in Sec. 655.720. Since March of 1999, the Department has 
been operating a pilot program involving the automated processing of 
LCAs. Although the Department encountered a number of technical 
problems throughout the operation of the national pilot, we believe 
that these problems have been resolved. Despite these temporary 
setbacks, the program thus far has generally proven to be successful. 
Therefore, the Department intends to fully implement the automated 
processing of all LCAs submitted by employers of H-1B nonimmigrants.
    The transition to the automated system will occur on February 5, 
2001, the date on which the relevant sections of this Rule 
(Secs. 655.720 and 655.721) become applicable as stated in the DATES 
provision of this Preamble. Because the new system requires ETA to 
create appropriate software, obtain necessary hardware (including 
telephone lines, scanners, and other facilities), and obtain and train 
new staff, as well as conduct field trials to verify the reliability of 
the system once it is in place, the Department has concluded that it 
will not be feasible for the system to be operable before February 5, 
2001. This delay in the applicability of the new system will also 
enable ETA to process all ``old'' LCAs which may be in queue in the 
current system (including the current FAX-back system) on the effective 
date of the Interim Final Rule. During the interval between the 
effective date of the Interim Final Rule (January 19, 2001) and the 
applicability date of the new system (February 5, 2001), LCAs will not 
be accepted by FAX but must, instead, be submitted in hard copy. The 
Department recognizes that this hard copy filing will be an 
inconvenience to employers, but we anticipate that this short-term 
inconvenience will be fully offset by the increased efficiency and 
reliability of the automated system which will be available after 
February 5, 2001.
    On the effective date of this Interim Final Rule, January 19, 2001, 
the revised version of Form ETA 9035 will become the sole form for use 
by employers and their attorneys; thereafter, prior versions of the 
Form ETA 9035 will not be accepted for processing. The redesigned Form 
ETA 9035 is being published as an appendix to this Rule. Note that Form 
ETA 9035 no longer contains the full statements of the attestations 
required by the Act and the regulations. Rather, these statements, 
together with the instructions for filling out the form, are contained 
in the new cover pages, Form ETA 9035CP, and incorporated by reference 
in Form ETA 9035. The employer, through its designated official, is 
required to read the attestation statements set forth in the cover 
pages and indicate on the Form ETA 9035 its concurrence with the 
statements in Form ETA 9035CP.
    The revised form is to be completed with a program that will be 
made available for download from the Department's World Wide Web site 
at http://ows.doleta.gov. For those employers who are unable to or 
choose not to use the form-fill program to complete the form, a blank 
hard copy of the form will also be available from any ETA regional 
office. The hard-copy forms may still be typewritten or completed by 
hand.
    During the interim period as described above, the LCA may be 
submitted in hard copy by U.S. mail or private carrier. After February 
5, 2001, the LCA may be submitted in hard copy by U.S. mail to the ETA 
Application Processing Center at the P.O. Box address identified in 
Sec. 655.720(b) of the Interim Final Rule; delivery by private carrier 
will no longer be allowed because such carriers cannot deliver

[[Page 80133]]

items to U.S. Post Office boxes such as the address of the Processing 
Center. Alternatively, after the automated processing system becomes 
applicable on February 5, 2001, the LCA may be submitted by FAX 
transmission to a toll-free 1-800 number (1-800-397-0478), which will 
route incoming FAXes to an automated servicing center.
    The automated processing system will electronically scan the 
incoming facsimile, extract the information contained in the 
application, record the information in a database, and make the 
appropriate determination to certify or to reject the application. LCAs 
that are mailed to ETA will be electronically scanned and entered into 
the automated processing system. As under the current manually-operated 
system, the application will be certified and FAXed (or mailed) back to 
the submitter if the appropriate boxes are checked, the required 
information is provided on the form, and the form has been signed and 
dated by the employer. If the form is incomplete or contains obvious 
inaccuracies, it will be rejected and sent back to the submitter with 
an addendum that identifies the deficiencies in the application.
    At the present time, the ETA Web Site at http://ows.doleta.gov 
lists the submission date of the LCAs that the computer is currently 
processing. If the employer has submitted an LCA and has not received a 
response after a reasonable period of time has elapsed (e.g., seven 
working days), it is suggested that the employer check the ETA Web 
Site, and if it indicates a current processing date which is later than 
the date on which the employer submitted the LCA, either re-submit the 
application (if using the automated system after February 5, 2001, re-
FAXing to the 1-800 number identified above) or call the information 
number listed on the Web Site. The employer should not, however, submit 
unnecessary duplicates of an original application (e.g., by FAXing the 
application to the LCAFAX system and also mailing a hard copy of the 
application, or by re-FAXing the application before seven days have 
passed). The Department will provide user support in the form of a help 
line for employers to call to verify that the system is up and running, 
and to obtain other information such as the date of receipt of LCAs 
that are currently being processed by ETA staff designated for the H-1B 
program. However, given the architecture of the LCAFAX system, it will 
be technologically infeasible for ETA to verify receipt of a particular 
LCA.
    The Department received 10 comments on the proposed form and 
automated processing system. Most commenters generally favored the 
Department's proposal but expressed the desire that it be thoroughly 
tested before being implemented on a nationwide basis. We believe that 
the system has had an extensive pilot test. In Fiscal Year 2000 alone 
(October 1, 1999 through September 30, 2000), the Department processed 
nearly 300,000 applications using the automated system. Since the 
inception of the system in March of 1999, each of the two nodes of the 
system has processed over 200,000 applications. While a number of 
technical problems have been encountered, the Department is confident 
that the system should be fully implemented.
    Six commenters were critical of the Department for not producing a 
version of the form-fill program that will run on the Apple Macintosh 
operating system. The program that was utilized during the pilot test 
was a Windows-based program that ran only on computers with a Windows 
operating system. These commenters urged the Department to develop a 
version of the program that will run on Macintosh computers or, 
alternatively, to use a platform-neutral format such as Adobe Acrobat. 
The Department agrees with these commenters and has developed a program 
to be used to complete the form in a platform-neutral format, Adobe 
Acrobat. This software will be widely distributed and, as previously 
stated, will be available for download from multiple locations on the 
World Wide Web.
    One commenter (ACIP) expressed concern that since much of the print 
on the form is in such a small font, the form may be rendered illegible 
in the FAX transmission process from the attorney to the employer to 
the automated processing system.
    The Department is aware of this potential problem and has 
identified technologies that would allow the form to be transmitted via 
electronic mail which will be included as part of the program. Under 
this scenario, after the employer's attorney or agent completes the 
form using the program, the form could then be e-mailed to the employer 
and printed out for the employer's signature and subsequent FAX 
transmittal to the automated processing system. Thus, the form FAXed by 
the employer to the Department would still be an original document. The 
pilot test has shown that documents other than an original (e.g., a FAX 
of a FAX) are often unable to be read properly by the system and their 
submission usually results in either a rejection of the application or 
a notification that the form was not able to be read by the automated 
system.
    Intel and ACIP stated that the proposed four-page form is 
impractical to ``post'' to satisfy the employer's obligation of notice 
to workers. These commenters suggested that the form be redesigned so 
that all of the information that is required to be contained in the 
notice (set forth at Sec. 655.734(a)(1)(ii)) appear on the same page.
    The Department does not believe this to be practical, given the 
amount of information that is required to be contained in the notice 
and the amount of space taken up by those items on the form. However, 
the Department has modified the proposed LCA form, compressing it to 
three pages rather than four pages as proposed. The Department is 
exploring technologies that would allow an employer, in addition to 
printing the pages of the form itself, print a separate page with those 
data elements from the form that are required to be contained in the 
notice. The employer will have a choice of posting the three-page form 
or another notice containing the required information. Should the 
Department's efforts to modify the software to enable an employer to 
print a one-page posting addendum with the requisite data elements from 
the form prove successful, posting the addendum would also satisfy the 
notice requirement. The Department notes, however, that the employer is 
required by the current regulations at Sec. 655.734(a)(2) to provide 
the entire certified LCA to the H-1B workers no later than when they 
report to work.
    One commenter (ACIP) inquired as to whether the pages of the form 
may be stapled together or whether the pages must be posted side-by-
side. The Department believes that a posting consisting of the pages 
stapled together would satisfy the notice requirement, provided of 
course that it is done in such a fashion as to permit interested 
parties to readily view each page of the form.
    Another commenter expressed concern that the proposed form would 
not permit an employer readily to take advantage of the new provision 
which permits an employer to satisfy the notice requirement 
electronically. Notwithstanding the fact that the form itself does not 
need to be posted electronically--only certain data contained therein--
the Department has also identified technologies that allow an employer 
to directly notify its employees by sending a copy of the application 
by electronic mail to

[[Page 80134]]

similarly employed employees at the place of employment.
    The Department has also made a slight modification to the proposed 
form to allow employers to continue to have the option of expressing 
the rate of pay as a pay range. This option was omitted from the draft 
form which appeared with the proposed rule published in the Federal 
Register on January 5, 1999 (64 FR 673). Since 1992, the H-1B 
regulations have provided that ``[w]here a range of wages is paid by 
the employer * * *, a range is considered to meet the prevailing wage 
requirement so long as the bottom of the wage range is at least the 
prevailing wage rate.'' (57 FR 1316) This provision, now at 
Sec. 655.731(a)(2)(vi), remains in effect. Thus, the LCA form that 
appears with this Interim Final Rule has been modified accordingly.
    Several commenters expressed concern that the Department would not 
devote adequate resources, including personnel and infrastructure, to 
support the automated processing system. The Department notes that the 
new system will be supported by the monies allocated to the Department 
to reduce the processing time of LCAs as part of the $1,000 fee imposed 
upon employers of H-1B nonimmigrants (i.e., the $500 fee enacted by 
ACWIA, increased to $1,000 by the October 2000 Amendments). The 
Department believes that with the supplemental resources it receives as 
part of that fee account, it will be able to operate the program in an 
efficient and timely manner, once the system becomes applicable.
    The regulations have been modified at Secs. 655.720 and 655.730 to 
reflect the changes in the processing of the LCA, and to require that 
the revised Form 9035 be either FAXed to the 1-800 number identified 
above or transmitted by U.S. mail to the ETA Application Processing 
Center at the address specified in the regulation and on the Form. 
Revised Sec. 655.720, along with new Sec. 655.721, becomes applicable 
on February 5, 2001.
    The Department cautions employers that the changes being made in 
the LCA form and the LCA filing and processing system do not modify the 
substantive obligations of employers concerning their attestations 
(e.g., wages, notices, strike/lockout) or the necessity for obtaining 
ETA certification of the LCA prior to employment of the nonimmigrant. 
In our view, a ``new'' employer which hires an H-1B nonimmigrant from 
another H-1B employer, pursuant to the October 2000 Amendments' 
``portability'' provision, must have a certified LCA to support the 
visa petition when it is filed and the nonimmigrant begins work

C. What H-1B Workers Would Be ``Exempt H-1B Nonimmigrants''? 
(Sec. 655.737)

    The ACWIA relieves H-1B-dependent employers and willful violators 
from the additional attestation elements if the LCA is used only for 
``exempt'' H-1B nonimmigrants. In the words of Senator Abraham, ``* * * 
employers required to include the new statements on their applications 
are excused from doing so on applications that are filed only on behalf 
of `exempt' H-1B nonimmigrants.'' (144 Cong. Rec. S12751 (Oct. 21, 
1998)). See also the statement by Congressman Smith, 144 Cong. Rec. 
E2325 (Nov. 12, 1998).
    In addition, for a limited time after the ACWIA's enactment, 
neither the numerator nor the denominator of the ratio of H-1B 
nonimmigrants to full-time equivalent workers, used to determine H-1B 
dependency, was to include ``exempt'' H-1B workers. Because that time 
will have expired with the promulgation of this Rule, this provision no 
longer has effect and it is not incorporated in the regulations.
    The ACWIA establishes two tests for whether an H-1B nonimmigrant is 
``exempt.'' The H-1B nonimmigrant must either (1) ``receive[] wages 
(including cash bonuses and similar compensation) at an annual rate 
equal to at least $60,000,'' or (2) ``ha[ve] attained a master's or 
higher degree (or its equivalent) in a specialty related to the 
intended employment''.
    In introducing the topic of exempt status, the NPRM noted that the 
statutory language seems clear. A dependent employer or willful 
violator is required to attest and comply with the new attestation 
elements unless the only H-1B nonimmigrants employed pursuant to the 
LCA are exempt workers. It was the Department's reading of this ACWIA 
language that if a covered employer used an LCA in support of any 
nonexempt worker, that employer would be obligated to comply with the 
new attestations with respect to all H-1B nonimmigrants hired pursuant 
to that LCA, exempt as well as nonexempt. However, the NPRM noted that 
the employer would be free to file separate LCAs for its exempt and 
nonexempt workers. (Note: because this issue is closely related to 
IV.C.4 (``Should the LCA be Modified to Identify Whether it Will be 
Used in Support of Exempt and/or Nonexempt H-1B Nonimmigrants?''), 
below, the comments and discussion on this issue will be included in 
IV.C.4.)
    The NPRM also specified that initial determinations of workers' 
exempt status will be made by INS while adjudicating petitions filed on 
their behalf by their prospective employers. The Department proposed 
that copies of the approved H-1B petition, with the INS determination 
as to exempt status, should appear in the employer's public access 
file. The Department stated that, in the event of an investigation, 
considerable weight would be given to the INS determinations of exempt 
status based on educational attainment. However, if the exemption was 
claimed based on earnings, the employer would be expected to document 
that the exempt H-1B nonimmigrant actually received sufficient pay to 
satisfy the statutory wage ``floor'' of $60,000.
    Six commenters responded to these proposals.
    The proposal that INS initially determine exempt status when it 
adjudicates petitions evoked a mixed response. Senators Abraham and 
Graham stated that the ACWIA does not grant either INS or DOL the 
authority to prevent approval of a visa on the basis of whether or not 
an individual qualifies as ``exempt.'' Similarly, AILA questioned the 
authority of DOL to delegate this review to INS and expressed concern 
that INS lacks the resources to make timely assessments of this issue; 
AILA stated that such review is contrary to the nature of the LCA as an 
employer attestation document, and that a worker's status should be 
reviewed only pursuant to a DOL investigation. AILA further suggested 
that DOL should accept an employer's reasonable determination of exempt 
status, or at a minimum should not assess penalties if the employer's 
reasonable determination is in error.
    Conversely, ACIP, ITAA and Rapidigm agreed that the INS should make 
the exempt determination and suggested that its determination of 
educational relevance should be dispositive; ACIP pointed out that 
employers should first have an opportunity to challenge rejected 
claims. BRI questioned how INS can make an ``initial'' determination of 
the exemption status since employers must make the determination at the 
time the LCA is filed.
    It is the Department's understanding that INS will examine the 
exempt status of any nonimmigrant whose petition is accompanied by an 
LCA that indicates that it is to be used exclusively for exempt 
workers. This INS review will not be pursuant to a delegation from DOL. 
Rather, INS has advised that it considers this review to be an 
appropriate adjunct to its role in

[[Page 80135]]

adjudicating the admissibility of the individual workers, since an LCA 
for exempt workers cannot validly be used for a worker unless the 
worker is in fact exempt. INS will not deny a petition on the basis 
that the worker is not exempt; however, it will require that the 
information on the accompanying LCA correspond with the characteristics 
of the worker for whom the petition was submitted. Thus, just as INS 
verifies that the worker's occupation and the LCA occupation 
correspond, it will verify that the worker is exempt where the employer 
has attested that the LCA will be used only to support exempt workers. 
If INS initially determines that a worker is nonexempt, the employer 
will be given an opportunity either to submit additional documentation 
in support of the worker's exempt status or to submit an LCA with no 
claim of exemption.
    The Department anticipates that in most cases, INS will need to do 
no more than review the stated wage level to ensure that it would equal 
at least $60,000 per year. Only where the wage standard would not be 
met will it be necessary for INS to review a worker's educational 
qualifications. As discussed in IV.C.2 and IV.C.3, below, the 
Department believes that this determination too can be easily made in 
most cases, and therefore that INS review of valid exemptions should 
not ordinarily delay approval of a petition.
    The Department in an investigation will ensure that a worker whom 
an employer attested will be paid more than $60,000 per year has in 
fact received the required compensation. Only if the employer had so 
attested and the earnings floor has not been satisfied will the 
Department determine whether the worker is exempt based on educational 
attainment (including the field of study). However, where the employer 
did not attest that a worker would be paid more than $60,000 per year 
but instead makes its claim of exemption based only on educational 
attainment, and INS has determined that an H-1B worker is exempt based 
on the evidence submitted to it of educational attainment, that INS 
determination will be conclusive unless the Department finds that the 
INS determination was based on false information.
    The Department notes that this ``up front'' review by INS should 
generally avoid the situation which could arise in DOL enforcement if 
an employer erroneously determined a worker is exempt based on 
educational attainment, but DOL later determines the worker is not in 
fact exempt. In such situations, the employer would face possible 
penalties for misrepresentation and failure to perform the required 
attestation elements. DOL cannot agree with AILA's suggestion that the 
special attestation protections for U.S. workers would not apply where 
an employer has made a reasonable but erroneous determination as to 
exempt status. Furthermore, the Department believes that penalties are 
a particularly important remedy since, as a practical matter, it will 
often be impossible to cure such violations after the fact. Nor does 
the Act provide any relief from debarment for a failure to perform the 
attestation elements regarding displacement of U.S. workers. Debarment 
and other penalties may be imposed for recruitment violations, however, 
only where such violations are ``substantial.'' The circumstances 
regarding the exemption determination, as well as the facts regarding 
the recruitment performed by the employer, will be taken into 
consideration in determining whether a recruitment violation is 
``substantial.'' The circumstances will also be taken into 
consideration in assessing civil money penalties and in determining 
whether an employer has made a misrepresentation in its attestation 
that the LCA will only be used for exempt workers.
    With regard to BRI's question of how INS can make an ``initial'' 
determination when the employer has already done so on the LCA, the 
Department clarifies that the term ``initial'' is used to distinguish 
between determinations made by the INS at adjudication and the 
occasional determination which might occur during Departmental 
investigation. It is of course necessary for the employer to make its 
own similar assessment as to the worker's exempt status prior to 
submitting the LCA and the worker's petition.
    Rapidigm commented that exempt H-1B nonimmigrants should not be 
included in the ratio in making the dependency determination. The 
Department notes that the statute imposes a time limit upon the period 
in which exempt H-1B nonimmigrants are excluded from the ratio (i.e., 
six months after ACWIA enactment or the effective date of these 
regulations). Since that time limit has now expired, the determination 
of H-1B-dependency now must include exempt workers.
    Finally, ITAA disagreed with the proposed requirement that 
employers maintain a copy of the H-1B petitions with the INS 
determinations of workers' exempt status in the public access file. On 
further consideration, the Department agrees that because of privacy 
considerations, these documents need not be included in the public 
access file. However, the Department believes that it is important for 
the public to know which workers are supported by an LCA for exempt 
workers, so that the public will know which workers are not covered by 
the new attestation elements, and be able to challenge exemption 
determinations where there is reason to believe the basis for the 
exemption is invalid. Therefore, employers will be required to include 
in their public access file a list of the H-1B nonimmigrants supported 
by an LCA attesting that it will be used only for exempt workers, or in 
the alternative, a simple statement that the employer employs only 
exempt H-1B workers. Furthermore, employers will need to retain H-1B 
petitions and any evidence regarding workers' exempt status (i.e., pay 
records and evidence related to educational attainment) so that they 
may be provided to DOL in the event of an investigation.
1. How Would the $60,000 Annual Rate be Determined? (Sec. 655.737(c))
    The ACWIA provides that H-1B nonimmigrants will qualify as 
``exempt'' if they receive wages (including cash bonuses and similar 
compensation) at an annual rate of at least $60,000. Those who receive 
this level of compensation will qualify as ``exempt'' without 
satisfying the alternative, educational standard.
    In the NPRM, the Department proposed that, to ensure this standard 
is met, it should be interpreted consistently with the existing DOL 
regulations for determining if an employer has satisfied its other wage 
obligations under the H-1B program (20 CFR 655.731(c)(3)). Future 
(i.e., unpaid but to-be-paid) cash bonuses and similar compensation 
would be ``counted'' toward the required wage if their payment is 
assured, but not if they are conditional or contingent on some event 
such as the employer's annual profits, unless the employer guarantees 
that the nonimmigrant will receive compensation of at least $60,000 per 
year in the event the bonus contingency is not met. The Department also 
proposed that bonuses and compensation are to be paid ``cash in hand, 
free and clear, when due,'' meaning that they must have readily 
determinable market value, be readily convertible to cash tender, and 
be received by the worker when due. The bonuses and compensation for 
purposes of this ACWIA requirement must be received by the worker 
within the year for which the employer wants to ``count'' the 
compensation.
    In addition, the Department interpreted the statutory language

[[Page 80136]]

``receives wages (including cash bonuses and similar compensation) at 
an annual rate equal to at least $60,000'' to mean that the worker 
actually receives at least $60,000 compensation in each year. 
Therefore, the NPRM provided that an H-1B nonimmigrant who, because of 
part-time employment, receives less than $60,000 in compensation in a 
year would not qualify as exempt on the basis of compensation, even if 
his or her hourly wage, projected to a full-time work schedule, would 
exceed $60,000 in a year.
    Ten commenters responded to the Department's proposals on this 
issue.
    The AFL-CIO stated that exempt workers must receive $60,000 in 
wages annually as an entitlement. The AEA stated that exempt workers 
should receive $60,000 or higher without including any benefits or 
bonuses. APTA and AOTA stated that an exempt worker must receive wages 
equal to at least $60,000, which must not include other employee 
benefits, such as health insurance, retirement plans, and life 
insurance.
    Senators Abraham and Graham and ACIP contended that the statutory 
language ``at an annual rate equal to'' requires the Department to 
permit part-time workers and workers who work only part of the year to 
be considered exempt if their rate of pay, extrapolated to full-year, 
full-time work would meet the $60,000 threshold. Latour noted that in 
the information technology industry, some of the most highly 
compensated and distinguished experts work part-time for several 
employers, and therefore suggested that the Department allow the 
$60,000 minimum compensation to be computed on an hourly, weekly, or 
other basis. The National Association of Computer Consultant Businesses 
(NACCB) expressed concern about nonimmigrants who terminate during the 
year, and therefore suggested the Department interpret the statutory 
provision to allow a worker to receive $1,200 in wages per week.
    The Department concurs in the view expressed by employee 
representatives that fringe benefits in the nature of health insurance, 
pension, and life insurance, are not similar to cash bonuses and are 
not wages within the meaning of the definition of ``exempt H-1B 
nonimmigrant.'' Therefore benefits will not count toward the required 
$60,000 level under the Interim Final Rule.
    The Department does not concur, however, with the view that the 
$60,000 minimum compensation requirement may be prorated for part-time 
employees. Congressman Smith, in describing the legislation prior to 
its enactment, stated that the additional attestation requirements will 
apply to H-1B-dependent employers petitioning for H-1B nonimmigrants 
without masters degrees who ``plan to pay the H-1Bs less than $60,000 a 
year.'' 144 Cong. Rec. H8584 (Sept. 24, 1998). Later statements in the 
Congressional Record by both principal sponsors of the ACWIA also 
describe the annual wage standard as firm. Senator Abraham stated: ``An 
`exempt' H-1B nonimmigrant is defined * * * as one whose wages, 
including cash bonuses and other similar compensation, are equal to at 
least $60,000. * * *'' (144 Cong. Rec. S12751 (Oct. 21, 1998)). 
Similarly, Congressman Smith stated: ``An `exempt' H-1B nonimmigrant is 
defined * * * as one whose annual wages, including cash bonuses and 
other similar compensation, will be equal to at least $60,000 (and will 
remain at such level for the duration of his or her employment while 
under an H-1B visa).'' (144 Cong. Rec. E2325 (Nov. 12, 1998); see also 
E2324). These statements underscore the statutory objective of ensuring 
that only highly compensated H-1B workers are exempted on the basis of 
their compensation. If the workers are not, in fact, highly compensated 
(i.e., if they do not actually receive wages of $60,000), then this 
objective is not achieved. Furthermore, allowing a pro rata of the 
$60,000 compensation would necessitate that the employer be able to 
demonstrate that the part-time worker received an appropriate ``share'' 
of the annual compensation, based on the portion of a full-time year's 
work that he/she performed. The Department considered allowing an 
employer to claim the exemption for workers who would be employed part-
time by more than one employer and would earn combined wages of at 
least $60,000 per year. However, the Department concluded that this 
approach would not be feasible since an employer would not be able to 
ensure effectively that workers did in fact receive the statutory wage 
level of $60,000 and since such an exception could not be effectively 
administered. The Department notes that part-time employees could still 
qualify as exempt based on their education, notwithstanding their 
relatively lower annual compensation.
    However, it is the Department's view that H-1B workers who are 
hired at compensation of at least $60,000 per year, but who are 
employed for less than a year, will satisfy the statutory requirement 
if they receive at least $5,000 for each month worked. For example, a 
worker who resigned after three months would be required to have been 
paid at least $15,000. Similarly, if the Administrator conducted an 
investigation and found that a worker had not yet worked a year, the 
Administrator would determine whether the worker had been paid $5,000 
per month, including any unpaid, guaranteed bonuses or similar 
compensation.
    ITAA concurred with the Department's view that unconditional, 
noncontingent bonuses or other payments may be counted toward the 
$60,000 compensation to qualify for the exemption. AEA opposed 
inclusion of bonuses at all, expressing concern that some employers 
might pay a very low wage and promise a bonus at the end of the year, 
but never pay the bonus unless ``caught'' before the end of the year. 
BRI suggested that the Department should allow an annual bonus to be 
paid on a specified date, contingent only upon compliance with the 
contract.
    Since the ACWIA expressly permits inclusion of cash bonuses, the 
Department does not believe it has the discretion to exclude them from 
the required minimum compensation, as suggested by AEA. With regard to 
the bonus described by BRI, the Department is of the view that such a 
bonus would be in compliance only where the employer ensures that a 
worker who terminates employment before the end of the year in fact 
receives $60,000, prorated for the amount of time worked. An employer's 
remedy against the worker in such a case of early termination may be 
afforded by state law relating to the recovery of liquidated damages 
under the contract, as discussed in IV.J, below.
2. How Would the ``Equivalent'' of a Master's or Higher Degree be 
Determined? (Sec. 655.737(d)(1))
    Also defined as ``exempt'' for purposes of the additional 
attestations are H-1B nonimmigrants who have ``attained a master's or 
higher degree (or its equivalent) in a specialty related to the 
intended employment.'' The Department proposed to define ``or its 
equivalent'' to mean a foreign academic degree equivalent to a master's 
degree or higher degree earned in the United States, and not to allow 
equivalency to be established through work experience.
    The Department received ten comments on this proposal.
    The AFL-CIO and AOTA agreed with the Department's interpretation 
limiting this prong of the exemption to nonimmigrants with a foreign 
academic degree equivalent to a U.S. master's or

[[Page 80137]]

higher degree, with no substitution of work experience. AOTA observed 
that the occupational therapy profession is moving toward a master 
level education requirement for entry to the profession, and believes 
it is reasonable for foreign workers to meet the same education and 
training as U.S. workers. Because a master's degree will be the 
benchmark for the physical therapist profession after January 1, 2002, 
APTA would go even further and require that a nonimmigrant have a 
doctorate degree to qualify for the exemption. ACIP also agreed with 
the Department's proposal that an exempt H-1B worker must hold a U.S. 
master's degree or its foreign academic equivalent.
    Other trade associations and employers who commented on this issue 
generally disagreed with this interpretation. Six commenters (AILA, 
BRI, ITAA, Rapidigm, TCS, Satyam) contended that the Department's 
position is inconsistent with statutory language and current INS 
regulations. AILA asserted that the ACWIA's use of the phrase 
``master's degree or equivalent'' rather than ``master's or equivalent 
foreign degree'' supports the well-established INS procedure of 
allowing equivalencies to be established through either degree 
equivalence or work experience in its adjudication of whether an 
applicant has the equivalent of a bachelor's degree for H-1B admission 
and whether an applicant has the equivalent of a master's degree for 
certain second preference employment admissions. Rapidigm and Satyam 
stated that different ``equivalency'' standards for H-1B admission and 
exempt status should not apply to the same pool of immigrants. TCS 
expressed concern that the Department's interpretation would lead to 
inquiries into the quality of education in foreign countries, rather 
than the level of education as contemplated by ACWIA; TCS contended 
further that since all foreign master's degrees are already 
incorporated under the term master's degree, the ACWIA phrase ``its 
equivalent'' must refer to something else.
    Additionally, this Department requested the views of the U.S. 
Department of Education regarding this element of the ACWIA. The 
Department of Education, through its Office of Educational Research and 
Development, responded to this Department's inquiry.
    The Office of Education Research and Improvement (OERI) expressed 
the general view that ``possession of a master's degree or its 
equivalent'' referred to master's degrees awarded by accredited United 
States institutions or degrees granted by foreign academic 
institutions, which as measured by educators within the United States, 
are at least equivalent to master's degrees awarded by accredited 
United States institutions. With regard to nonimmigrants possessing a 
United States degree, the OERI suggested a three-prong inquiry: (1) Was 
the awarding institution accredited at the time of the award by an 
association recognized by the Secretary of Education or is/was the 
institution a bona fide member of the Council on Higher Education 
Accreditation; (2) was the program of study for which the degree was 
awarded either included in the Classification of Instructional Program 
or incorporated by reference from an international program 
classification; and (3) is/was the program of study related to an 
occupation classified in the Standard Occupational Classification or an 
international occupation classification.
    The OERI expressed the view that basically the same inquiry should 
take place where the academic credentials are granted by a foreign 
educational institution. The OERI recommended that the inquiry begin by 
determining whether the awarding institution is/was a recognized 
institution under the laws and policies governing accreditation in the 
institution's country. It suggested that the second and third prongs of 
the test could be met by applying the guidelines, recommendations, and 
practices of the National Council on the Evaluation of Foreign 
Educational Credentials, a group managed by the American Association of 
Collegiate Registrars and Admissions Officers. The OERI explained that 
these standards are utilized by U.S. educators in assessing the bona 
fides of a foreign degree or a program of study abroad and determining 
their equivalence to U.S. degrees and standards.
    The Department is of the view that Congress intended exempt status 
to apply only to highly qualified employees. The Department therefore 
believes that Congress did not intend to substitute work experience for 
education, but rather required the attainment of an advanced academic 
degree (or the alternative $60,000 wage standard) for dependent 
employers and willful violators who may hire H-1B nonimmigrants without 
complying with the new attestation elements. In introducing the ACWIA 
on the floor, Congressman Smith explained: ``[T]he compromise eases 
requirements on companies when they are petitioning for workers who 
have advanced degrees. * * * The point I want to make is that the term 
`or its equivalent' refers only to an equivalent foreign degree. Any 
amount of on-the-job experience does not qualify as the equivalent of 
an advanced degree.'' 144 Cong. Rec. H8584 (Sept. 24, 1998).
    The commenters are correct in noting that the INS regulations they 
have cited, governing minimal qualifications for H-1B admission, do 
recognize work experience in lieu of an academic degree. However, the 
ACWIA employs the phrase ``or its equivalent'' in a subparagraph 
distinguishing minimally qualified ``nonexempt'' H-1B nonimmigrants 
from better qualified ``exempt'' workers. ``A master's or higher degree 
(or its equivalent)'' is one of two higher thresholds provided to draw 
this distinction. If the educational standard could be satisfied by 
relevant work experience alone, the wage threshold would serve no 
independent purpose. The added value of the $60,000 threshold is that 
it exempts well-compensated workers even if they have not attained a 
master's or higher degree, or have done so in a specialty not related 
to their intended employment. The ``work equivalency'' interpretation 
advocated by employers and their representatives blurs this clear 
statutory distinction between exempt and nonexempt nonimmigrants.
    Moreover, it is the Department's view that its interpretation is 
fully consistent with the plain language of the statute, especially 
when contrasted with the language in section 214(i) of the INA, 8 
U.S.C. 1184(i), which explicitly authorizes work experience in lieu of 
a bachelor's degree for admission as an H-1B nonimmigrant. The ACWIA 
exempts all H-1B nonimmigrants who have attained a master's or higher 
degree (or its equivalent) in a specialty related to their intended 
employment--with no suggestion that this requirement can be satisfied 
with work experience. The Department does not believe it is relevant 
that the INS regulations concerning admission of immigrants under the 
second preference employment category treat certain work experience as 
equivalent to a master's degree. Not only are those regulations 
unrelated to the H-1B nonimmigrant program, but the statutory language 
in section 203(b)(2)(A) of the INA, 8 U.S.C. 1153(b)(2)(A), is clearly 
distinguishable, granting preference to ``qualified immigrants who are 
members of the professions holding advanced degrees or their 
equivalent.'' Unlike the specific term ``master's degree'' cited in the 
ACWIA, the generic term ``advanced degree'' encompasses all post-
graduate academic credentials. Consequently, the expression ``advanced 
degrees or their equivalent'' would seem to be without

[[Page 80138]]

meaning if not interpreted to include work experience.
    The phrase ``or its equivalent'' in the ACWIA is not without 
meaning under the Department's interpretation. In fact, it is not 
uncommon for the titles of foreign degrees to differ from those used 
within the U.S. educational system, or for the same title to have 
different educational requirements. Differences in academic 
nomenclature can create significant confusion for government programs 
and universities that deal with persons educated abroad. The existence 
of credential evaluation services and academic guidelines for admission 
of foreign students to colleges and universities are indications that 
degree equivalency is not always readily apparent.
    There is, however, a readily available source of information 
concerning degree equivalence. The National Council on the Evaluation 
of Foreign Educational Credentials (NCEFEC) and the American 
Association of Collegiate Registrars and Admissions Officers (AACRAO) 
have developed specific guidance for most countries regarding which 
education and training credentials are considered to be reasonably 
similar to corresponding U.S. credentials. AACRAO published these 
guidelines in 1994 in a publication entitled Foreign Educational 
Credentials Required for Consideration of Admission to Universities and 
Colleges in the United States (4th ed), which is widely used by 
admissions offices and credential evaluation services. These guidelines 
reflect the prevailing opinion and considered judgment of experienced 
foreign student admissions officers in U.S. colleges and universities. 
The Department will use this publication as a guide for determining 
degree equivalence. The AACRAO publication is available for a fee of 
$30 and can be obtained by contacting AACRAO Distribution Center, P.O. 
Box 231, Annapolis Junction, MD 20701, or through their website, 
www.aacrao.com/pubsale/grade.html.
    The AACRAO guidelines explain that a Ph.D. entry level document--
i.e., the diploma or degree required for entry at the Ph.D. level 
(equivalent to a U.S. master's degree)--``represents a minimum of one 
full-time year of study beyond a bachelor's equivalent. The study must 
also be viewed as advanced as opposed to supplemental.'' For example, 
post-graduate training to earn a teacher's certificate is considered 
supplemental rather than advanced, and would not be equivalent to a 
master's degree. Where documents with the same name are awarded at more 
than one level, the publication includes parenthetical guidance such as 
``earned after a three-year program.''
    Because the AACRAO publication identifies academic prerequisites 
for entry into various levels of U.S. education, it must be used 
carefully. Three columns of information are provided for each country 
of origin: level of entry into the U.S. educational system; foreign 
certificates, diplomas or degrees required for admission at this level; 
and necessary supporting documentation. The first column displays the 
levels at which students are normally admitted into U.S. undergraduate 
or graduate programs. Within the graduate tier, the three levels of 
admission shown are Master, Ph.D., and Unclassified/Special. Persons 
entering Ph.D. programs would possess degrees equivalent to a U.S. 
master's, as set forth in the second column. Persons in the category 
``Unclassified/Special'' would ordinarily possess degrees equivalent to 
a U.S. doctorate (Ph.D.), as set forth in the second column. (Persons 
whose credentials correspond to the entry ``Master'' currently have the 
equivalent of a U.S. bachelor's degree, qualifying them to begin 
master's level study.)
    The Department seeks comments on whether it should incorporate the 
AACRAO publication in the Final Rule for use in determining whether a 
degree an H-1B nonimmigrant has obtained from a foreign educational 
institution is equivalent to a U.S. master's degree. In the 
alternative, employers would be able to present evidence of degree 
equivalence from a credential evaluation service where there is no 
foreign degree listed as equivalent to a U.S. master's, or where a 
worker obtained a degree in the past, and the terminology in the 
foreign country has changed.
    As recommended by the OERI of the Department of Education, the 
Interim Final Rule requires that the institution from which the worker 
obtained its degree be recognized or accredited under the law of the 
country. The Interim Final Rule further provides that where an employer 
claims an H-1B nonimmigrant is exempt based upon educational attainment 
(rather than wages), the employer will be required to provide, upon 
request of INS or DOL, evidence that the worker has received the degree 
in question, as well as a transcript of the courses taken and grades 
earned.
3. How Is ``a Specialty Related to the Intended Employment'' Defined? 
(Sec. 655.737(d)(2))
    The ACWIA specifies that the H-1B nonimmigrant who holds a master's 
or higher degree (or an equivalent degree) qualifies as ``exempt'' only 
if that degree is in ``a specialty related to the intended 
employment.'' The Department proposed that in order for the 
nonimmigrant's degree specialty to be sufficiently ``related'' to the 
intended employment to qualify for exempt status, that specialty must 
be generally accepted in the industry or occupation as an appropriate 
or necessary credential or skill for the person who undertakes the 
employment in question. Furthermore, the Department stated that it 
would give considerable weight to INS determinations concerning the 
academic credentials of H-1B nonimmigrants who are claimed to be 
``exempt'' on this basis.
    Six commenters responded to the Department's proposals on this 
issue.
    AILA asserted that there is no statutory authority for the 
``appropriate or necessary'' standard and that these terms are very 
different in that ``related'' does not mean ``necessary.'' AILA 
suggested that an employer should be able to determine what specialty 
degrees it considers to be ``appropriate'' and that it should be able 
to establish the relationship by a variety of means, such as through 
specific course work, or by showing that it is a standard company 
requirement and that all others in the same position have the same 
credentials.
    ACIP acknowledged the statutory requirement that the master's 
degree or equivalent be in a field relevant to the occupation and 
suggested that due deference be given to an employer's determination 
that a degree is relevant. ACIP observed that employers are better 
placed than the government to track evolving occupations, job duties, 
and degrees. Other commenters (Kirkpatrick & Lockhart, Latour, TCS) 
went further and urged the Department to defer to an employer's good 
faith determination of what fields of study are related to the 
employment in question. One commenter noted that only one quarter of 
information technology professionals possess a computer science, 
computer engineering, or MIS degree.
    The AFL-CIO suggested that the Department utilize the new North 
American Industrial Classification System (NAICS) in making the 
determination that a specialty is related to the employment; it stated 
that the NAICS includes job qualifications by occupational 
classification, formulated by the Bureau of Labor Statistics with the 
input of labor and business.
    In addition, two law firms (Kirkpatrick & Lockhart and Latour) 
expressed the view that DOL should not judge the relevance of the 
alien's

[[Page 80139]]

educational background to their job if that alien is receiving $60,000 
or more per year.
    The Department agrees that a worker may qualify as exempt by 
meeting either the salary or educational standard, and is not required 
to qualify under both tests. However, where the compensation level is 
not met, the Department cannot simply disregard the statutory 
requirement that the individual hold a master's or equivalent degree in 
a specialty related to the intended employment, nor can it 
automatically defer to an employer's judgment, as some commenters 
seemed to suggest. The Department considers it appropriate to provide 
guidance as to the meaning of the statutory requirement. As Congressman 
Smith stated, ``It is also important to note that the degree must be in 
a specialty which has a legitimate, commonly accepted connection to the 
employment for which the H-1B nonimmigrant is to be hired.'' (144 Cong. 
Rec. E2325 (Nov. 12, 1998)). The Department believes that its proposed 
standard--that the degree be generally accepted in the industry or 
occupation as an appropriate or necessary skill or credential--is an 
appropriate articulation of this requirement, and this standard is 
adopted in the Interim Final Rule. The Department does not intend to 
imply that a master's degree in a specific field must be a prerequisite 
for employment in the occupation in order for a worker to meet the 
``related'' requirement for the exemption. On the other hand, the 
employer's statement of relevance cannot be accepted without 
substantiation since the employer would have little incentive to 
consider the relevance of the field in which a master's degree was 
earned if the occupation does not normally require a master's degree. 
For example, many employers seeking a systems analyst require a 
bachelor's degree in computer science, information science, computer 
information systems, or data processing, but not an advanced degree. In 
contrast, computer scientist jobs in research laboratories or academic 
institutions generally require a Ph.D. or at least a master's degree in 
computer science or engineering. U.S. Bureau of Labor Statistics, 1998-
99 Occupational Outlook Handbook. The Department does agree, however, 
that a field not ordinarily considered relevant to an occupation could 
be related to a specific job. For example, a master's degree in public 
health could be a related field for a computer specialist in the health 
industry.
    The Department concurs with the AFL-CIO proposal that an objective 
standard is appropriate as a guide in determining whether a field is 
related to an occupation. However, it is the Department's view that the 
NAICS is not appropriate since it spells out industrial rather than 
occupational codes. The Department believes that there are two 
occupational data systems that provide information better suited to the 
related field inquiry: the U.S. Bureau of Labor Statistics Occupational 
Outlook Handbook, and 0*NET 98.
    The Occupational Outlook Handbook is a well-recognized source of 
job and career information. Revised every two years, the Handbook 
describes for about 250 of the most common occupations, what workers do 
on each job, their working conditions, earnings, and other pertinent 
information. For each job, the Handbook identifies the training, 
education, and licensing requirement for the occupation, if any, as 
well as the educational background desired by employers and the common 
educational background of persons in the occupation. The Handbook can 
be purchased from the Government Printing Office in paper, hard cover, 
and CD-ROM format. Groups of related jobs covered in the Handbook are 
available for purchase as individual reprints. The Handbook also can be 
accessed free of charge on the Bureau of Labor Statistics' website, at 
http://stats.bls.gov/ocohome.htm. The Handbook's easy-to-use electronic 
version can be accessed by specific jobs or occupational clusters.
    O*NET 98 was recently developed by the Labor Department, with the 
input of both labor and business. This user-friendly electronic data 
system, designed to replace and expand upon the Dictionary of 
Occupational Titles (DOT), links various occupational classifications 
to one another and to the Department of Education's Classification of 
Instructional Programs (CIP). For each of the over 1,100 occupations in 
this system, an O*NET 98 occupational profile lists the principal 
fields of study appropriate to that occupation under the heading 
``instructional programs.'' O*NET 98 can be purchased on CD-ROM or 
diskette from the Government Printing Office and can also be downloaded 
free of charge from the Department's website at www.doleta.gov/programs/onet. In addition, like the Occupational Outlook Handbook, 
O*NET 98 can be accessed over the Internet at any public library.
    The Handbook and O*NET 98, in the Department's view, provide 
useful, objective guidelines for determining whether a specific 
academic discipline is related to the occupation, i.e., whether a 
degree in the field is generally accepted in the industry or occupation 
as an appropriate or necessary skill or credential. The Department will 
therefore utilize these sources as guides. The Department also will 
consider other industry studies obtained by employers or the opinions, 
solicited by the employer, from a bona fide credentialing organization 
attesting that a nonimmigrant's academic specialty is generally 
accepted by the pertinent industry or occupation as appropriate or 
necessary for the employment in question. Employers are encouraged to 
rely on these sources in determining whether a master's degree (or its 
equivalent) is in a field related to the job in question.
    The Department also seeks comment on whether the Final Rule should 
incorporate the Occupational Outlook Handbook and O*NET as the primary 
sources for determining fields of study related to specified 
occupations. The Department realizes, however, that there may be other 
instances where a master's degree in a specialty that is not identified 
in either of these sources still may be recognized by the industry or 
occupation in question as related to the employment in question. The 
Department proposes that if an employer chooses not to rely on O*NET or 
the Occupational Outlook Handbook, or these sources fail to establish 
the required relationship, an employer seeking to establish such 
relationship could obtain a report by a credentialing organization that 
a degree in the field is recognized by the industry or occupation as an 
appropriate or necessary skill or credential. The Department seeks 
comment on whether this is an appropriate task for credentialing 
services, and whether there are other recognized sources of information 
which can and should be utilized for this purpose--in addition to, or 
in place of, the sources cited.
4. Should the LCA Be Modified to Identify Whether it Will Be Used in 
Support of Exempt and/or Non-Exempt H-1B Nonimmigrants? (Sec. 655.737)
    As discussed above, the ACWIA provides that ``[a]n application is 
not described in this clause [i.e., is not subject to the new 
attestation requirements] if the only H-1B nonimmigrants sought in the 
application are exempt nonimmigrants.'' The Department therefore 
proposed that a dependent employer or willful violator would be 
required to attest and comply with the new attestation elements unless 
the only H-1B nonimmigrants employed pursuant to the LCA are exempt 
workers. If a covered employer used an LCA in support of any nonexempt 
worker, that employer would be obligated to comply

[[Page 80140]]

with the new attestations with respect to all H-1B nonimmigrants hired 
pursuant to that LCA, exempt as well as nonexempt.
    The NPRM stated that the Department considered proposing that 
employers file separate LCAs for their exempt and nonexempt H-1B 
workers. However, the Department noted that two different workers might 
very well both be qualified for the same occupation, but one might be 
exempt and another nonexempt. Therefore the Department preliminarily 
concluded that it was not appropriate to restrict an employer's freedom 
to utilize an LCA for both exempt and nonexempt workers, provided that 
the employer in such circumstances complied with the additional 
attestation requirements for all of the H-1B nonimmigrants under the 
LCA. The Department noted in the NPRM that an H-1B-dependent employer 
or willful violator would be free to file separate LCAs for its exempt 
and non-exempt workers, thereby obviating the requirement of complying 
with the new attestation elements for its exempt workers. Furthermore, 
the NPRM provided that a dependent employer or willful violator who 
planned to utilize an LCA only for exempt workers would be required to 
so attest on the LCA.
    Five commenters responded to this proposal.
    The AFL-CIO strongly agreed that when exempt and nonexempt H-1B 
workers are included on the same LCA, the new attestations should apply 
to both. In its view, it would be illogical for a single document to 
impose different obligations on the employer with respect to different 
nonimmigrants supported by the same document. TCS, on the other hand, 
stated that while it does not itself use a single LCA for multiple 
workers, DOL should not take away an appropriate exemption when the LCA 
of an exempt worker also includes nonexempt workers. Rapidigm 
questioned why dependent employers should be required to submit two 
LCAs where, under the same circumstances, other employers are permitted 
to submit just one. BRI suggested that employers have one LCA and check 
a box to indicate that they will comply with the attestations for 
nonexempt workers only. ITAA expressed concern that DOL will not be 
able to handle the increased workload from multiple LCAs.
    It is the Department's view that the unambiguous language of the 
statute relieves dependent employers and willful violators from the 
special attestation requirements only if the LCA is used only for 
exempt H-1B nonimmigrants. The Department points out that such 
employers are not required to submit separate LCAs for exempt and non-
exempt workers. However, the Department notes that if an employer 
attests that an LCA will only be used for exempt employees, but the LCA 
in fact is used for both exempt and nonexempt workers notwithstanding 
the employer's attestation, the employer is required to comply (from 
the beginning of the LCA's effective period) with the special 
requirements with respect to all workers on the LCA (both exempt and 
nonexempt).
    With regard to concern about the Department's ability to handle the 
additional volume of LCAs associated with separate applications for 
exempt and nonexempt workers, the Department estimates that this 
requirement will affect not more than 150 to 250 employers, with a 
midpoint of 250. Furthermore, the Department has instituted a new FAX-
back system for processing and certifying LCAs, which will help 
streamline the process.
    There were only two comments on the narrow issue of what form the 
revised LCA should take. The AFL-CIO stated that employers should 
indicate on the face of the LCA whether or not it will be used in 
support of H-1B petitions for exempt H-1B workers. BRI suggested that a 
box should be provided on the LCA which the employer could check, 
agreeing to comply with the attestations for non-exempt workers only; a 
separate written statement regarding the worker's exempt status would 
then be filed with INS.
    As noted above, the Department will permit dependent employers and 
willful violators to utilize one LCA for both exempt and nonexempt 
workers, but the employer taking this course will be obliged to comply 
with the new attestation elements for all workers under the LCA. 
Therefore the Department does not consider it necessary to require such 
employers to indicate on the form that it will be used for nonexempt 
workers. However, the language on the LCA form is modified to make it 
clear that if an employer checks the box attesting that it will only 
use the LCA for exempt workers, the employer will not be permitted to 
use the LCA for nonexempt workers. This will permit the employer, the 
public, and the workers, as well as DOL, to know whether the additional 
attestation elements apply with respect to the workers under an LCA, 
and will permit INS to know whether the worker's exempt status must be 
verified. The LCA form is further modified to state that if an employer 
utilizes the LCA for a nonexempt worker in violation of its 
attestation, the employer will have been required to comply with the 
new attestation elements with respect to all H-1B nonimmigrants 
supported by the LCA.

D. What Requirements Apply Regarding No ``Displacement'' of U.S. 
Workers Under the ACWIA? (Sec. 655.738)

    Section 212(n)(1)(E) and (F) of the INA as amended by the ACWIA, 8 
U.S.C. 1182(n)(1)(E) and (F), imposes requirements upon H-1B-dependent 
employers and employers who have been found to have willfully violated 
their H-1B obligations that are designed to protect certain U.S. 
workers from being ``displaced'' by H-1B workers. As noted in the NPRM, 
such an employer is prohibited from displacing a U.S. worker who is 
``employed by the [H-1B-dependent] employer'' and from displacing a 
U.S. worker who is employed by some other employer at whose worksite 
the H-1B dependent employer places an H-1B worker (where there are 
``indicia of employment'' between the H-1B worker and the other 
employer). Thus, the prohibition may apply to the dependent employer's 
own workforce (primary displacement) or to the workforce of another 
employer with whom the dependent employer does business (secondary 
displacement). With respect to the dependent employer's own workforce, 
the prohibition applies during a period beginning 90 days before and 
ending 90 days after the date of the filing of an H-1B petition on 
behalf of the H-1B worker. With respect to a customer's workforce, the 
prohibition applies during a period beginning 90 days before and ending 
90 days after the placement of the H-1B worker. As discussed at IV.C, 
above, the displacement prohibitions do not apply to LCAs that are used 
only to support the employment of ``exempt'' H-1B workers. See Section 
212(n)(1)(E)(ii).
    In introducing the compromise ACWIA bill to the Senate, Senator 
Abraham explained:

    ``[T]his legislation provides three types of layoff protection 
for American workers.
    ``Let me add that throughout the process of working on this 
legislation, we have been very mindful of the concerns people have 
that somehow these H-1B temporary workers might end up filling a 
position where an American worker could have filled the slot. Our 
goal is to make sure that does not happen, and we have built 
protections into this agreement which we and the administration feel 
will accomplish that objective.
    ``First, any company with 15% or more of its workforce in the 
United States on H-1B visas must attest that it will not lay off an 
American employee in the same job 90 days

[[Page 80141]]

or less before or after the filing of a petition for an H-1B 
professional.
    ``Second, an H-1B dependent company acting as a contractor must 
attest that it also will not place an H-1B professional in another 
company to fill the same job held by a laid off American 90 days 
before or after the date of placement.
    ``Third, any employer, whether H-1B dependent or not, will face 
severe penalties for committing a willful violation of H-1B rules, 
underpaying an individual on an H-1B visa, and replacing an American 
worker. That company will be debarred for 3 years from all 
employment immigration programs and fined $35,000 for each 
violation.''

144 Cong. Rec. 10878 (Sept. 24, 1998). (Note: the third type of layoff 
protection, discussed in IV.M.5, below, applies enhanced penalties for 
willful violations of any of the attestation provisions, by both H-1B-
dependent and non-dependent employers, where a U.S. worker is displaced 
in the course of the violations. See Section 212(n)(2)(C)(iii) of the 
INA as amended by the ACWIA, 8 U.S.C. 1182(n)(2)(C)(iii).)
    The Department received virtually identical requests from several 
individuals that the Department provide additional information to U.S. 
workers so that they could better understand their rights; these 
individuals expressed their concern that H-1B workers might be used to 
replace older U.S. workers. As discussed in III.B, above, the 
Department plans extensive education activities in an effort to ensure 
that both U.S. and H-1B workers are aware of the provisions of the H-1B 
program as modified by the ACWIA. The Department acknowledges the 
concern among older workers that their employment may be placed at risk 
through the potential hire of younger H-1B workers, who may be willing 
to perform the same work at a reduced level of pay and benefits. 
Although the ACWIA may operate to reduce this possibility by requiring 
that H-1B workers be employed at no less than the higher of the 
prevailing wage or the actual wage paid by the employer for the work in 
question, the concerns of U.S. workers in this regard are more directly 
addressed by the Age Discrimination in Employment Act, 29 U.S.C. 621 et 
seq., which is administered by the Equal Employment Opportunity 
Commission (EEOC). The Department suggests that workers or employers 
with particular concerns regarding possible instances of age 
discrimination should contact their local EEOC office.
    The Department also notes that section 417 of the ACWIA directs the 
National Science Foundation to contract with the National Academy of 
Sciences to conduct a study to assess the status of older workers in 
the information technology field, including ``the relationship between 
rates of advancement, promotion, and compensation to experience, skill 
level, education, and age.'' See ACWIA, Section 417(b). The National 
Science Foundation also has been charged with conducting a study and 
preparing a report to assess labor market needs for workers with high 
technology skills during the next ten years. See ACWIA, Section 418(a) 
. The ACWIA further directs the Executive Branch to bring to the 
attention of Congress any reliable economic study that suggests that 
the increase in the number of H-1B workers effected by the ACWIA ``has 
had an impact on any national economic indicator, such as the level of 
inflation or unemployment, that warrants action by the Congress.'' See 
ACWIA, Section 418(b). Both of these reports were required to be 
submitted to Congress no later than October 1, 2000. NAS, through the 
Computer Science and Telecommunications Board, National Research 
Council, has invited submission of ``white papers'' and has scheduled a 
series of meetings to discuss and receive input for a single study 
addressing both sets of issues. Further information about this study, 
and the means by which members of the public may furnish input, can be 
found at http://www4.nationalacademies.org/cpsma/ITWPublic2.nsf.
1. What Constitutes ``Employed by the Employer,'' for Purposes of 
Prohibiting a Covered Employer from Displacing U.S. Workers in Its Own 
Workforce? (Sec. 655.715)
    The ACWIA displacement protections only apply to U.S. workers 
``employed by the employer'' and to U.S. workers ``employed by the 
other employer'' where the H-1B worker is placed at another employer's 
worksite and there are indicia of employment. See Section 
212(n)(2)(E)(i) and (F) of the INA as amended by ACWIA, 8 U.S.C. 
1182(n)(2)(E)(i) and (F). The ACWIA contains no definition of the 
phrase ``employed by the employer.'' The Department stated its view in 
the NPRM that where Congress has not specified a legal standard for 
identifying the existence of an employment relationship, the Supreme 
Court requires the application of ``common law'' standards, as held in 
Nationwide Mutual Insurance Co. v. Darden, 503 U.S. 318 (1992); 
Community for Creative Non-Violence v. Reid, 490 U.S. 730 (1989). 
Noting the Supreme Court's teaching that the common-law test contains 
``no shorthand formula or magic phrase that can be applied to find the 
answer, * * * [and requiring that] all of the incidents of the 
relationship must be assessed and weighed with no one factor being 
decisive'' (NLRB v. United Ins. Co. of America, 390 U.S. 254, 258 
(1968)), the Department proposed regulatory language setting out 16 
factors (adapted from EEOC Policy Guidance on Contingent Workers, 
Notice No. 915.002 (Dec. 3, 1997)) that would indicate the existence of 
an employment relationship under the common law test. The NPRM sought 
comments regarding the proposed test and alternative formulations of 
the common law or other tests for determining whether an employment 
relationship exists, such as the test under the FLSA and the test used 
in the federal tax context.
    The Department received nine comments on its proposal.
    The NACCB agreed that, in light of the absence of a statutory 
standard for determining the existence of an employment relationship, 
the common law standard should be used. It also observed that the 
common law test used under the Internal Revenue Code should be the same 
as the common law test set forth in the NPRM and should provide 
consistent results. The NACCB opposed application of the Fair Labor 
Standards Act test. The AFL-CIO also agreed that the common law test 
was appropriate and stated that this determination should be based on 
objective criteria. It urged the Department to prevent employers from 
hiding behind artificial titles and job descriptions; it also noted its 
belief that many individuals deemed independent contractors (or 
employees of a staffing firm) are actually common law employees.
    Four commenters (AILA, ITAA, Latour, Chamber of Commerce) rejected 
the common law test as unnecessary, failing to reflect contemporary 
realities within the regulated community, or lacking predictability. 
ITAA also asserted that the ACWIA did not signal a departure from the 
definitions of an ``employer'' under the current regulations of this 
Department (20 CFR 655.715) and the INS (8 CFR 214.2(h)(4), 274a.1(g)). 
Three of these commenters recommended using the standards set forth by 
the Internal Revenue Service, noting that these standards are already 
used by the industry and would eliminate confusion and promote 
predictability. BRI and Baumann recommended that the Department 
eliminate ``skill'' as a factor because it is essentially a requirement 
of the H-1B program. Senators Abraham and Graham expressed the view 
that the proposed test was ``unnecessarily complicated and subjective'' 
and

[[Page 80142]]

suggested that ``[t]he Department's regulation should follow the 
statute and our intent by using [as a sole factor whether] 'the worker 
is considered an employee of the firm or the client for tax purposes, 
i.e., the entity withholds federal, state, and Social Security 
taxes.''' Similarly, AILA suggested that any worker who is classified 
as an independent contractor for tax and benefit purposes should not be 
considered an employee. The Chamber of Commerce commented that if the 
Department lists the common-law factors, it should use the list in the 
Supreme Court opinions, not the somewhat longer list of factors 
utilized by EEOC.
    After careful consideration of the comments, the Department has 
concluded that it should utilize the common law standards for 
determining whether a United States worker is employed by a dependent 
employer--the status that invokes the statute's protection against 
displacement. As noted in the NPRM, the Department believes that it is 
required by Supreme Court precedent to apply the common law test for 
employment relationship in the absence of plain statutory language 
directing the use of a different test. None of the comments submitted 
persuade the Department that it may craft a different test under the 
ACWIA.
    Upon reflection, however, the Department has concluded that the 
regulation should not include a detailed list of prescribed factors. 
The Department believes that the factors identified in the NPRM provide 
a useful framework, based on the common law, for distinguishing between 
employees and independent contractors. Nevertheless, to avoid any 
potential misunderstanding that the factors on the list are exclusive 
or that factors not listed are less deserving of consideration, the 
Department has decided that no list of factors should be included in 
the Interim Final Rule. The Interim Final Rule reiterates that the 
common-law test requires an assessment of all the factors bearing on 
the employment relationship, with the right to control the means and 
manner of work being the key determinant but with no one factor 
controlling.
    Some commenters expressed a concern that there is tension between 
the NPRM's formulation and the IRS test. However, the Department has 
not been persuaded that such a tension exists between these tests, 
which are both drawn from the common law multifactor analysis. The NPRM 
list of factors is quite similar to the factors identified in IRS Rev. 
Rul. 87-41, 1987--Cum. Bull. 296, 298-99. As noted in the NPRM, the 
proposed list of factors for determining whether an employment 
relationship exists was drawn from a framework developed by the EEOC 
for its policies on contingent workers. And as the EEOC recognized, its 
framework was derived from non-exclusive lists of factors in Darden and 
the other sources for the common law test cited by the Supreme Court in 
Darden: Reid, the IRS ruling, and the Restatement (Second) of Agency 
220(2) (1958).
    Each of these sources for the common law test recognizes ``the 
right to control'' as the key determinant in ascertaining the existence 
of an employment relationship. As stated by the EEOC: ``The worker is a 
covered employee * * * if the right to control the means and manner of 
her work performance rests with the firm and/or its client rather than 
with the worker herself.'' Similarly, the IRS Revenue Ruling states: 
``[G]enerally the relationship of employer and employee exists when the 
person or persons for whom the services are performed have the right to 
control and direct the individual who performs the services, not only 
as to the result to be accomplished by the work, but also as to the 
details and means by which that result is to be accomplished. * * * It 
is not necessary that the employer actually direct or control the 
manner in which the services are performed; it is sufficient if the 
employer has the right to do so.'' See also the Supreme Court in the 
Darden and Reid and Section 220(1) Restatement (Second) of Agency. 
Thus, an employer that properly applies any formulation of the common 
law test, grounded upon the cited authorities, should obtain the same 
conclusion regarding an individual's employment status.
    In the Department's view, the EEOC's approach (in EEOC Policy 
Guidance on Contingent Workers, Notice No. 915.002, Dec. 3, 1997) 
provides an especially useful model for identifying particular factors 
that can be applied in the context of H-1B employment, particularly 
where workers are placed at third-party employer worksites. The EEOC 
established the list as guidance for ascertaining an individual's 
employment status in the analogous context of staffing firm workers, 
i.e., workers who are ``placed in job assignments by temporary 
employment agencies, contract firms, and other firms that hire workers 
and place them in job assignments with the firms' clients.'' As such, 
the list is oriented towards individuals providing services, and it 
provides a focus that facilitates a differentiation among individuals 
who may possess attributes of both employees and independent 
contractors. This focus, the Department believes, makes the EEOC 
formulation useful for resolving employee status questions in the H-1B 
environment, with its mix of individuals working at a facility operated 
by one employer, but who may be self-employed or employees of another 
employer(s). Employers may wish to consider other sources in 
determining employee status, including IRS materials. The IRS, for 
instance, has identified the following factors that may be helpful in 
determining employee status in the H-1B context: the firm or the client 
provides training to the worker so that the worker may perform services 
in a particular manner or method; the worker performs services for only 
one firm at a time; and the worker has been personally selected to 
perform the job by the client or firm. See IRS Rev. Rul. 87-41, 1987-
Cum. Bull. 296, 298-99.
    The Department is not persuaded that Congress evinced any intention 
that tax law principles should be applied by employers or this 
Department in determining employee status for purposes of the H-1B 
program. The statute evinces only that the common law test be applied, 
not any particular formulation of the test. The Department disagrees 
with the further suggestion that the IRS formulation of the common law 
test should be the preferred method for making employee status 
determinations. Such use could pose some problems in administering the 
H-1B program. While the IRS has developed a list of factors that it 
will consider in making employee independent contractor decisions, 
Congress, for an extended period of time, has limited that agency's 
interpretation and application of its common law-based test. Congress 
has imposed significant statutory limitations upon the IRS in 
collecting taxes from employers who fail to withhold taxes from 
individuals whom employers claim to be independent contractors. See, 
e.g., Section 530 of Pub. L. 95-600, as amended, 26 U.S.C. 3401 note, 
discussed in Hospital Resource Personnel, Inc. v. United States, 68 
F.3d 421 (11th Cir. 1995). Section 530(b) also prohibits the IRS from 
issuing any regulations or Revenue Rulings that would further clarify 
the employment status of individuals for purposes of the employment 
taxes. Consequently, the Department cannot be confident that an 
employer's treatment of a worker as an independent contractor or an 
employee for tax purposes accords with the common law test. 
Accordingly, the Department does not consider an

[[Page 80143]]

employer's designation of a worker's status for tax purposes to be 
controlling on the matter of that worker's status for purposes of the 
H-1B program. The fact that an employer has treated a worker as an 
independent contractor for tax purposes, without protest by the IRS, 
will not excuse an employer's non-compliance with its H-1B obligations 
toward that worker as an employee if the common law test shows the 
worker to be an employee.
    The Department is not persuaded that the factor relating to a 
worker's level of skill or expertise should be eliminated from the 
common law test. While the Department agrees with the observation that 
the occupations for which H-1B workers are sought require more advanced 
skills than those required for many other jobs, it remains true that a 
worker's advanced skill is one of the factors weighing against an 
employment relationship and must be examined in determining whether a 
worker who may have been displaced was an employee or an independent 
contractor.
    Finally, the Department notes that although this test is most 
important in the context of displacement, the common law test applies 
in any situation under the H-1B program where the question of 
employment relationship may arise (see the discussion in IV.B.1, above, 
regarding application of the formula for determining whether an 
employer is H-1B-dependent). The Interim Final Rule states, however, 
that every H-1B nonimmigrant is by definition an employee of the 
petitioning employer since only employees are granted entry/status as 
H-1B nonimmigrants.
2. What Constitute ``Indicia of an Employment Relationship,'' for 
Purposes of the Prohibition on Secondary Displacement of U.S. Workers 
at Worksites Where the Sponsoring Employer Places H-1B Workers? 
(Sec. 655.738(d)(2)(ii))
    Section 212(n)(1)(F)(ii) of the INA as amended by the ACWIA, 8 
U.S.C. 1182(n)(1)(F)(ii), prohibits the displacement of U.S. workers 
employed by another (``secondary'') employer, if an H-1B-dependent 
employer or willful violator intends or seeks to place its own H-1B 
workers with that other employer in a situation where, among other 
things, there are ``indicia of an employment relationship between the 
nonimmigrant and such other employer.''
    In his Congressional Record statement, Senator Abraham 
characterized the secondary placement provision as applying ``where the 
H-1B worker would essentially be functioning as an employee of the 
other employer.'' Senator Abraham further stated that the requirement 
that there be ``indicia of employment'' is ``intended to operate 
similarly to the provisions in the Internal Revenue Code in determining 
whether or not an individual is an employee.'' 144 Cong. Rec. S12751 
(Oct. 21, 1998).
    In the NPRM, the Department stated its view that this protection 
would be invoked where the relationship between the business receiving 
the services of the H-1B individual possesses some, but not all, of the 
attributes of an employment relationship. Thus, the Department proposed 
as a test for this relationship a list of factors that it derived from 
the common law test which the Department had proposed for ``primary 
displacement'' (discussed above in IV.D.1). The Department identified 
nine factors it believed to be most useful in determining whether the 
H-1B worker and the business at which he or she has been placed by the 
primary employer possess the requisite ``indicia of an employment 
relationship.'' The Department requested comments on its proposed test 
and any alternative formulations for determining secondary displacement 
coverage.
    Several commenters responded to the proposal on this issue. Two 
employee organizations (AOTA, APTA) generally endorsed the Department's 
proposal, but sought assurances that the Department will hold 
recruitment/staffing firms to the same standard as other employers. One 
individual (Miano) urged that workers on H-1B visas should be 
considered employees of a company if they work at that company's 
facility and take direction from the company's management. Rapidigm 
asked the Department to explain how it settled on the factors it 
identified in the proposal.
    Senators Abraham and Graham and three representatives of employers 
(AILA, ITAA, Latour) asserted that the legislative history of the ACWIA 
notes that ``indicia of employment'' was meant to operate in a manner 
similar to IRS provisions and that the focus of the regulations should 
be on that test. Senators Abraham and Graham continued: ``[O]ur intent 
was simple * * *. Anyone without [a contract directly with the putative 
employer], whether an independent contractor, or an employee of a 
third-party employer, would not be `employed by the employer.' '' The 
Chamber of Commerce reiterated its opposition to application of common 
law standards, but urged that if the Department does adopt these 
standards, both the quantity and quality of common law factors 
sufficient to establish ``indicia of an employment relationship'' 
should be substantially the same as those necessary to establish the 
``employed by the employer requirement.'' The Chamber of Commerce also 
requested that the Department strike from the list of the ``indicia'' 
factors that ``the client can discharge the worker from providing 
services to the client'' because this factor, it asserts, places an 
unnecessary burden on typical contracting and subcontracting business 
arrangements, under which a client retains the right to insist that a 
worker be removed from the client's jobsite. TCS expressed concern that 
the Department's proposal may improperly lead to the result that its 
consultants will be seen as meeting the ``indicia'' nexus. In this 
regard, it stated that the Department fails to mention what TCS 
believes to be the most important criterion--who pays, assigns, and 
trains the individual at issue, and who possesses ultimate control over 
him--and does not indicate how various factors are to be weighed. AILA 
and ACIP expressed concern that a worker supplied by another company 
will often be subject to the controls identified by the Department as 
``indicia.'' ACIP contended that the Department may be misinterpreting 
the common law, asserting that a client-firm's typical control of 
hours, location, access, etc. should not turn an individual into the 
client's employee--a relationship that should be rare, not commonplace. 
Both groups also suggested that this test will operate contrary to 
settled subcontracting practices.
    The Department has carefully considered these comments. As 
explained previously, the Department is not persuaded by the suggestion 
that it could use anything other than the common law test for an 
employment relationship as the starting point for interpreting the 
``indicia of an employment relationship.'' The Department proposed a 
subset of the common law factors, which, in its view, are relevant and 
useful in determining the relationship between the H-1B worker and the 
client business, as distinct from those factors of the test that simply 
focus on whether an individual is self-employed.
    The Department sees no merit to the suggestion that Congress 
intended the use of the ``employment relationship'' test to determine 
the ACWIA-specific relationship between an H-1B worker and the 
secondary employer, which, in the language of the statute, possesses 
``indicia of an employment relationship.'' If Congress had wanted to 
use the same test for both purposes, it could have done so by using the 
same

[[Page 80144]]

language as it did for the relationship between a U.S. worker and his 
or her employer. That congress chose different language is a strong 
indication that it had a different intention than suggested by the 
commenters.
    Furthermore, how the employee is treated for IRS purposes is simply 
not pertinent, and is contrary to the clear intent of the provision. 
IRS is concerned only with the entity which is paying the worker--in 
this case necessarily the H-1B employer, not the secondary employer. 
Thus 26 U.S.C. 3401(d) defines ``employer'' for purposes of payroll 
deductions as ``the person for whom an individual performs or performed 
any service, of whatever nature,'' except that if that person does not 
have control of payment of wages, the person having such control is the 
employer. Regulations which followed the IRS approach would thus have 
the result of nullifying the secondary placement protections of the 
ACWIA.
    Finally, reading the provision as requiring less than a full 
employment relationship is congruent with the purpose of the statute to 
assist U.S. workers in retaining their employment where their jobs may 
be threatened by the actual or potential placement of H-1B workers. 
Congressman Smith commented that the legislation is intended to address 
the problems posed by ``job shops.'' In his introduction of the 
compromise ACWIA bill to the House of Representatives, he stated:

    ``The employers most prone to abusing the H-1B program are 
called job contractors or job shops * * *. They are in business to 
contract their H-1Bs out to other companies. The companies to which 
the H-1Bs are contracted benefit by paying wages to the foreign 
workers often well below what comparable Americans would receive. 
Also, they do not have to shoulder the obligations of being the 
legally recognized employers; the job shops remain the official 
employers.''

144 Cong. Rec. H8584 (Sept. 24, 1998). Senator Abraham also stressed 
the importance of the layoff protections of the bill, ``very mindful of 
the concerns people have that somehow these H-1B temporary workers 
might end up filling a position where an American worker could have 
filled the slot. Our goal is to make sure that does not happen.'' 144 
Cong. Rec. S10878 (Sept. 24, 1998). There is certainly no suggestion in 
Senator Abraham's explanation of this provision that it should be 
narrowly construed: ``An H-1B dependent company acting as a contractor 
must attest that it also will not place an H-1B professional in another 
company to fill the same job held by a laid off American 90 days before 
or after the date of placement.'' Ibid.
    In the NPRM, the Department did not indicate the point at which the 
relationship between a customer and an H-1B worker would trigger the 
displacement obligation. In this regard, the Department stated that it 
had considered, but rejected, an approach that would require the 
presence of at least some unspecified number of factors as a litmus 
test. No commenter expressed disagreement with this decision.
    Upon review, the Department has decided that, as with the test of 
employment relationship, the single most important consideration will 
be whether the customer has the right to control when, where, and how 
the worker performs the job, i.e., the manner or method by which the 
particular duties of the job are to be performed. Thus, the presence of 
this element alone suggests that the relationship between the customer 
and the H-1B worker approaches that of employee to employer. Although a 
consideration, the displacement obligation would not be triggered 
simply because the H-1B worker performed duties on the customer's 
premises.
    The Department disagrees with the suggestion that the approach it 
proposed is likely to upset usual contracting relationships. The 
triggering of the secondary displacement liability of the H-1B employer 
does not itself mean that there is an employment relationship between 
the secondary employer and the H-1B worker. The fact that the placing 
employer ordinarily will control important aspects of the relationship, 
such as the pay, assignment, and training of the H-1B worker, does not 
mean that the relationship between the worker and the employer's client 
will not bear sufficient ``indicia of employment'' for the secondary 
displacement provisions of the ACWIA to apply. However, these 
provisions apply to the primary employer, which becomes liable under 
the terms of its LCA--not to the secondary employer, which incurs no 
liability under the ACWIA for the displacement.
    The Department is unpersuaded that it should eliminate any of the 
criteria it proposed as ``indicia.'' Contrary to the suggestion of some 
commenters, it is fully consistent with the purposes of the Act that 
the proposed test may result frequently in a conclusion that the 
secondary displacement prohibition is applicable.
3. What Constitutes an ``Essentially Equivalent Job,'' for Purposes of 
the Non-Displacement provisions of the ACWIA? (Sec. 655.738(b)(2))
    Section 212(n)(4)(B) of the INA as amended by the ACWIA provides 
that displacement occurs if the employer ``lays off the [U.S.] worker 
from a job that is essentially the equivalent of the job for which the 
nonimmigrant or nonimmigrants is or are sought. A job shall not be 
considered to be essentially equivalent of another job unless it 
involves essentially the same responsibilities, was held by a United 
States worker with substantially equivalent qualifications and 
experience, and is located in the same area of employment as the other 
job.'' The area of employment is defined as ``the area within normal 
commuting distance of the worksite or physical location where the work 
of the H-1B nonimmigrant is, or will be, performed. If such worksite or 
location is within a Metropolitan Statistical Area, any place within 
such area is deemed to be within the area of employment.''
    Congressman Smith explained that Congress intended to prevent 
covered employers from replacing or displacing American workers with H-
1B workers. In his words:

    ``Congress ma[de] clear that the prohibition is directed to 
circumstances in which a covered employer hires H-1B workers with 
similar qualifications to those of laid off American workers in 
similar jobs.
    ``This language should not be interpreted as prohibiting and 
preventing only a one-for-one replacement of a particular laid off 
American worker; such an interpretation would be an overly rigid 
reading and a mischaracterization of Congressional intent. The focus 
of the provision is on the placement of H-1B workers in the kinds of 
jobs previously held by American workers. If an American worker was 
laid off from a job and the employer then hires an alien (on an H-1B 
visa) with sufficiently similar skills and experience to perform a 
sufficiently similar job, a prohibited displacement has taken place. 
This is a violation of the attestation regardless of whether the 
replacement was intentional or unintentional, or whether it was done 
in bad faith or not.''

144 Cong. Rec. E2324 (Nov. 12, 1998). He also noted that a dependent 
employer or willful violator is prohibited from ``concealing a lay off/
displacement by making a modest or cosmetic change in job duties and 
responsibilities [or] * * * by some other subterfuge or pretense.''
    On the other hand, Senator Abraham remarked:

    ``The reason for the change from [''specific employment 
opportunity''] is that it was thought desirable to include within 
the scope

[[Page 80145]]

of this prohibition situations where an employer sought to evade 
this prohibition by laying off a U.S. worker, making a trivial 
change in the job responsibilities, and then hiring the H-1B worker 
for a `different'' job' * * *. For similar reasons, especially given 
the nature of the jobs in question, the geographical reach of the 
prohibition was extended so as potentially to cover other worksites 
within normal commuting distance of the worksite where the H-1B is 
employed. This was to cover the eventuality that an employer might 
try to evade this prohibition by laying off a U.S. worker, hiring an 
H-1B worker to do that person's job, but assigning the H-1B worker 
to a different worksite very close by in order to conceal what was 
going on.''

144 Cong. Rec. S12750 (Oct. 21, 1998).
    Senator Abraham contrasted the provision in the ACWIA with the 
original definition in the House, which did not contain the phrase 
``from a job that is essentially the equivalent of the job for which 
the [H-1B worker] is being sought.'' Senator Abraham stated that 
``[t]hat phrase was added to make clear that this provision is not 
intended to be a generalized prohibition on layoffs by covered 
employers seeking to bring in covered H-1Bs, but rather a prohibition 
on a covered employer's replacing a particular laid-off U.S. worker 
with a particular covered H-1B.''
    In the NPRM, the Department explained that the comparison required 
to determine whether an unlawful displacement has taken place involves: 
a comparison first of the job held by the H-1B worker with the job held 
by the U.S. worker to determine if the jobs involve essentially the 
same responsibilities; a comparison of the U.S. worker with the H-1B 
worker to determine if they have substantially equivalent 
qualifications and experience; and a determination of the areas of 
employment, which must be the same for each worker in question.
    The Department proposed that when comparing the job 
responsibilities component of the provision, the focus should be on the 
core elements of the job, such as supervisory duties, design and 
engineering functions, or budget and financial accountability, and on 
whether both workers are capable of performing those duties. The 
Department further proposed that peripheral, non-essential duties that 
could be tailored to the particular abilities of the individual workers 
would not be determinative. The Department suggested that it might be 
useful to apply the standards under the Equal Pay Act (``EPA'') (29 
U.S.C. 206(d)(1)) for determining the essential equivalence of jobs. 
See 29 CFR 1620.13 et seq. In this regard, the Department noted that 
the EPA standards focus on actual job duties and responsibilities, 
rather than a comparison of sometimes artificial job titles and 
position descriptions. The Department noted its concern that the 
protection for U.S. workers could be thwarted if essential equivalence 
required a match of insubstantial aspects of jobs.
    As to the qualifications and experience of the workers, the 
Department proposed that the comparison be confined to matters which 
are normal and customary for the job, and which are necessary for its 
successful performance. In this regard, the Department proposed that 
although it would be appropriate to compare the relative qualification 
of the H-1B and U.S. workers by virtue of their education, skills, and 
experience, it would be inappropriate to compare their relative ages or 
their ethnic identities, or whether they are exactly alike in their 
educational background and work experiences. As an illustration, the 
Department stated its view that unlawful displacement could occur where 
an H-1B worker is ``overqualified'' for the job under comparison.
    With regard to ``area of employment,'' the NPRM noted that the 
definition is much the same as the Department's regulatory definition 
at Sec. 655.715 (see IV.P.5, below).
    The Department received five comments on its proposals on this 
issue.
    The AFL-CIO stated that the Department recognized that employers 
might seek to hide behind ``artificial job titles and position 
descriptions,'' and that the comparison is between the U.S. worker's 
and the H-1B worker's qualifications for the job in question. The AFL-
CIO stated that the Department must continue to rely on objective 
criteria such as the North American Classifications (NAICS), ``rather 
than the employer's self-serving declarations . . . of `intangible' 
qualifications, such as being a `team player,' * * *''
    Senators Abraham and Graham took issue with the Department's use of 
the EPA standard for a ``job'' which, they contended, takes the 
Department beyond the one-for-one displacement definition provided by 
the statute for determining whether an H-1B nonimmigrant displaced a 
U.S. worker in the same job. They stated that the EPA applies a 
``substantially similar''definition, which, in their opinion, is much 
broader than the ACWIA's ``essentially equivalent'' jobs standard. ITAA 
requested the Department to adopt a narrow reading of the displacement 
prohibition, suggesting that the Department's proposal improperly 
attempted to put in place an approach that had been rejected during the 
legislative process. ACE urged the Department to reconsider its plan to 
``strip away'' the relevant information about job responsibilities; it 
suggested that the Department, instead, should require that comparisons 
take into account the context and the actual, specific requirements and 
skills of a particular job.
    AILA took issue with the ``core elements'' approach as too broad 
and too difficult for an employer to apply. For example, AILA contended 
that under the ``core responsibilities'' analysis, a software engineer 
for a telecommunications project would appear to have the same core 
responsibilities as a software engineer for administrative functions, 
although the positions are very different and require different 
expertise and knowledge. On the other hand, AILA stated that the 
essential equivalence analysis of the EPA is more in keeping with 
legislative intent. AILA proposed a test that would compare the 
employer's existing job requirements and duties to those of the H-1B 
employee.
    AILA also stated its approval of the Department's proposals on 
``substantially equivalent'' and ``area of intended employment.''
    The Department continues to believe the distinction between core 
and peripheral elements of a job is important. The Department believes 
that its reference to the ``core elements'' of the job may have been 
misunderstood. The Department did not mean to imply, for example, that 
if each job required design and engineering functions, for example, 
there would be a match of core elements of the job, but rather that the 
design and engineering functions of a job such as software engineer are 
core rather than peripheral elements. The Department would agree with 
AILA that a job as software engineer for telecommunications would not 
ordinarily be similar to a job as software engineer for administrative 
matters-- assuming the employer does not treat the job of ``software 
engineer'' as fungible and move workers from one project to another 
without regard to its content.
    The Department finds no merit to the suggestion, in effect, that 
the Department's interpretation of the phrase ``essentially 
equivalent'' is not based on the language of the ACWIA, but on an 
approach that was discarded during the legislative process. The 
Department believes that its interpretation of this term is well-
grounded in the specific language of the ACWIA. The Department is not

[[Page 80146]]

persuaded that the ACWIA's displacement provisions only operate on a 
``one-to-one'' basis. Where the workforce in question is small, it is 
quite possible that the comparison will be so focused, but in other 
situations a wider inquiry will have to be undertaken. For example, 
where an employer, through reorganization, eliminates an entire 
department with several employees and staffs this function with one or 
more H-1B workers, any U.S. worker(s) in that Department who 
occupies(d) an essentially equivalent job as that filled or to be 
filled by the H-1B worker(s) would be protected against displacement. 
The Department will also look closely at situations where a U.S. worker 
is laid off and his/her job is filled by a U.S. worker colleague whose 
own job is then filled by an H-1B nonimmigrant; the Department would 
seek to determine whether the first U.S. worker was, in fact, the 
subject of a prohibited displacement.
    The Department also continues to believe that the regulations 
implementing the EPA provide a useful source of standards for assessing 
the ``essential equivalence'' of jobs. Neither the EPA nor the ACWIA 
requires that the jobs under comparison be identical as a condition for 
invoking their provisions. Although the two statutes have operative 
language that differ in their specifics, each requires a determination 
of ``equivalence'' if an employee is to secure its protection. Thus, 
the EPA, at 29 U.S.C. 216(d)(2), provides: ``[No employee shall receive 
less pay than an employee of another gender] for equal work on jobs the 
performance of which requires equal skill, effort and responsibility 
under similar working conditions.'' This compares with the ACWIA, at 
Section 212(n)(4)(B), which provides: ``[A U.S. worker is displaced] 
from a job if the employer lays off the worker from a job that is 
essentially the equivalent of the job for which the [H-1B worker or 
workers] is or are sought,'' i.e., the job ``involves essentially the 
same responsibilities, was held by a United States worker with 
substantially equivalent qualifications and experience, and is located 
in the same area of employment as the other job.'' With regard to each 
statute, the regulatory challenge is to determine the point at which 
two arguably different jobs that share some but not all characteristics 
become essentially alike for the purpose of the required statutory 
comparison. See also the Department's regulations under the Family and 
Medical Leave Act, 29 U.S.C. 825.115(a), which use the same concept in 
defining ``equivalent position.'' On the other hand, it is not the 
Department's intention to adopt wholesale the EPA regulations, but 
rather to adapt those provisions which it considers relevant and 
appropriate in satisfying the analogous but somewhat different 
statutory test under the ACWIA. Significantly, under neither statute 
did Congress require an identity of jobs as a condition to invoke the 
statutory protection afforded workers.
    As noted in the NPRM, it is important that the comparison of the 
job filled by an H-1B worker and the job held by a U.S. worker take 
into account the actual duties of the jobs. See 29 CFR 1620.13(e), 
1620.14(a). U.S. workers would receive little protection if the 
comparison were to be made simply by job titles or position 
descriptions that easily can be tailored to disguise jobs, which in 
their actual performance, are essentially alike. The same concerns 
require that the comparison take into account the most significant 
components (i.e., core elements) of the jobs--so that a U.S. worker 
does not lose the Act's protection where the differences between the 
job and the workers themselves are insubstantial, peripheral, or 
reflect discrimination against U.S. workers. See 29 CFR 1620.14(a).
    As under the EPA, the jobs will be viewed as different if the skill 
required to perform the job the U.S. worker was holding is 
substantially different than that required to perform the job of the H-
1B worker. This does not end the inquiry, however, because the ACWIA 
requires in addition the comparison of the experience and 
qualifications of the workers, considering the experience, training, 
education, and ability of the workers as measured against the actual 
performance requirements of the jobs. Thus an inquiry must first be 
made into whether both workers possess the minimum qualifications for 
the job. Unlike the EPA, however, the comparison includes not only the 
experience and qualifications required to perform the job, but also 
experience and qualifications which are directly relevant in that they 
would materially affect a worker's relative ability to perform the job 
better or more efficiently. Furthermore, the statutory standard 
requires only that the workers' qualifications and experience be 
``substantially equivalent;'' certainly no two workers would have 
identical experience and qualifications. For example, the Department 
would consider a bachelor's degree from one accredited university to be 
substantially equivalent to a bachelor's degree another accredited 
university. Similarly, the Department would consider 15 years of 
experience to be substantially equivalent to 10 years of experience. 
Finally, a worker's qualifications or experience that are not needed or 
useful in performing the specific requirements of the job are not 
relevant to the comparison. For example, the Department would not 
ordinarily consider experience or a degree in an unrelated field to be 
relevant.
    As suggested in the NPRM, the Department's Interim Final Rule 
utilizes the current definition of ``area of intended employment'' at 
Sec. 655.715 to define ``same area of performance.''
4. How Does the ACWIA Distinguish Between a Prohibited ``Layoff'' and a 
Permissible Termination of an Employment Relationship? 
(Sec. 655.738(b)(1))
    The ACWIA's non-displacement prohibition applies only to a 
``layoff'' as that term is defined by the ACWIA. Section 
212(n)(4)(D)(i) of the INA as amended by the ACWIA, 8 U.S.C. 
1182(n)(4)(D)(i), states that a ``layoff'' means ``to cause the 
worker's loss of employment, other than through a discharge for 
inadequate performance, violation of workplace rules, cause, voluntary 
departure, [or] voluntary retirement.'' Furthermore, where loss of 
employment is caused by ``the expiration of a grant or contract (other 
than a temporary employment contract entered into in order to evade 
[the displacement provisions of the ACWIA],'' it is not a layoff within 
the meaning of the ACWIA.
    Congressman Smith and Senator Abraham both stated that Congress 
intended that the expiration of a temporary employment contract would 
be treated as a layoff if an employer enters into such a contract with 
the intent of evading the displacement prohibition. 144 Cong. Rec. 
E2324 (Nov. 12, 1998); 144 Cong. Rec. S12750 (Oct. 21, 1998).
    The Department explained in the NPRM that it would closely 
scrutinize any situation where there is some question regarding the 
voluntariness of the resignation or retirement of a U.S. worker. The 
Department also proposed that it would look to well-established 
principles concerning the ``constructive discharge'' of workers who are 
pressured to leave employment.
    In the NPRM, the Department stated its view that the statutory 
exception where the U.S. worker's loss of employment is caused by the 
expiration of a grant or contract was meant to address the common 
situation where scientists and other academic personnel

[[Page 80147]]

are expressly hired to work under a contract or grant from another 
institution. Thus, the Department proposed that where the funding is 
lost, and the worker is not replaced because of this loss, no layoff 
would occur within the meaning of the ACWIA. The Department similarly 
proposed that where a staffing firm or other commercial firm hires an 
employee expressly to work on a specific project under a contract with 
another business entity, it may choose, in appropriate circumstances, 
to discontinue his or her employment without violating the ACWIA.
    By way of illustration, the Department described a situation where 
no displacement violation occurs--the contract project ends and is not 
renewed, and the employer does not have a practice of then moving its 
employees to work under other contracts, or placing its employees on a 
call back list or its equivalent, but instead terminates the 
relationship for lack of work. The Department distinguished the 
preceding situation from one where a staffing firm places employees at 
other businesses, does not hire employees for a specific client or 
contract, and ordinarily moves its employees to perform work under 
other contracts. The Department proposed that in this latter situation, 
the Department might find a displacement if the employer terminates 
U.S. workers and hires H-1B workers to perform essentially the same job 
under a different contract or on a different project. The NPRM also 
noted the Department's intention to closely scrutinize situations where 
it appears that a particular contract, including commercial contracts 
and grants as well as employment contracts, has been used to evade the 
dependent employer's obligation not to displace U.S. workers.
    The Department received several comments on this issue.
    AOTA and the AFL-CIO generally supported the Department's approach. 
The AFL-CIO endorsed the Department's recognition of constructive 
discharge. The Chamber of Commerce, AILA and ACIP pointed out that the 
Department's proposal fails to mention that the ACWIA expressly 
excludes from ``layoff'' any discharge for inadequate performance, 
violation of workplace rules, or cause.
    The Department acknowledges its oversight in failing to paraphrase 
the introductory clause to the ACWIA's definition of ``lays off'' in 
the NPRM discussion of this point. This clause lists those personnel 
actions, such as a discharge for poor performance or cause, that should 
not be mistakenly considered as a ``layoff.'' The omission of this 
language from the NPRM was not intended to signal that this part of the 
definition was insignificant--only that this portion of the statute did 
not seem to require any regulatory explication. The Interim Final Rule, 
however, contains a complete statement of the statute's layoff 
provision, including the statutory exceptions.
    AOTA stated that the Department should scrutinize arrangements that 
may appear to be limited to the duration of a contract or grant; in its 
view, this would prevent staffing firms from falsely claiming that it 
had hired a person specifically for the contract in question. The AFL-
CIO suggested that employers who claim that a U.S. worker was not laid 
off due to expiration of contract or grant must document that they have 
not engaged in a pattern or practice of denying workers assignment to 
other projects. Two commenters (Kirkpatrick & Lockhart, Latour) noted 
that the Department correctly recognized that the expiration of a 
contract leading to the termination of employment is not a ``layoff'' 
for ACWIA purposes.
    Senators Abraham and Graham and ITAA stated that there should be no 
distinction between academic and other situations involving the 
expiration of a contract or grant. They expressed disagreement that it 
would be a layoff where a staffing firm deviates from its practice of 
continuing the employment of a worker after the expiration of a 
contract and fails to continue the employment of a U.S. worker. ITAA 
also objected to what it viewed to be an apparent presumption by the 
Department that temporary contracts ordinarily would be used to evade 
the displacement prohibition. The NACCB asserted that the distinction 
between employers that usually transfer employees from contract to 
contract and those that do not have that practice is impractical and 
unworkable in the information-technology staffing industry. It also 
provided examples of situations that it believed would be problematic 
under the Department's proposal. BRI expressed concern that the 
Department's approach would fail to account for situations where a 
particular worker was not qualified for positions under other contracts 
held by the employer.
    The Department does not presume that temporary contracts ordinarily 
will be used to evade the statute's displacement obligations. The 
Department also does not hold the view that Congress believed that 
employment contracts tied to the life of a grant or contract were 
solely a creature of academia. While one of the examples discussed in 
the NPRM concerned the use of such academic contracts, the NPRM also 
discussed the applicability of the provision to staffing firms, whose 
contracts typically are with more commercially-oriented businesses.
    As the NPRM suggested, the Department recognizes that the 
employment of workers on a contract or grant basis could pose some 
problematic issues. The comments received confirmed the Department's 
view. While the statute recognizes that a layoff typically will not 
occur where ``a worker's loss of employment * * * [is caused by] the 
expiration of a grant or contract,'' it expressly distinguishes this 
situation from an unlawful ``temporary employment contract entered into 
in order to evade a [displacement] condition.'' Section 
212(n)(4)(D)(i)(I). The Department intends to look closely at such 
contracts to ensure that employers do not attempt to evade the 
statutory obligations.
    Upon further review of this matter and consideration of the 
comments received, the Department has decided to continue the approach 
described in the NPRM. The Department, however, believes it appropriate 
that the totality of the circumstances be considered to determine 
whether a layoff has occurred. In many situations, the Department 
expects that it will be obvious whether a layoff has occurred (e.g., 
where a worker has voluntarily retired). In other cases, it will be 
unnecessary to resolve the question of whether the loss of the job was 
because of the expiration of a contract or grant because the jobs are 
clearly not equivalent.
    In the more difficult cases, a determination of whether the 
expiration of a grant or contract caused the loss of employment such 
that a layoff did not occur will require an examination of the practice 
of the employer (in cases of primary displacement) or the customer 
(where secondary displacement is at issue) insofar as it bears on the 
following questions: whether the U.S. worker's job, in fact, was tied 
to the life of a particular contract or grant; whether the employer has 
a practice, either as a general matter or with respect to the employee 
in question, to continue the individual, without interruption in his 
employment on other contracts or grants; whether the employer has a 
practice, again either as a general matter or with respect to the 
employee in question, that the employee will be called back when a 
contract for which he or she is qualified becomes available; whether 
the employer departed from its usual practice insofar as the hire or

[[Page 80148]]

placement of the H-1B worker is concerned; whether the reason for the 
departure from the practice was for a reason unrelated to the 
employment of the H-1B worker; whether there is any evidence to suggest 
that the employer intended to evade its displacement obligations; and 
the employer's previous history of compliance with its displacement and 
other H-1B obligations. This analysis will be used by the Department to 
determine whether it is the expiration of the contract or grant which 
has caused the termination of the employee or some other consideration 
such as the hiring of the H-1B worker.
    The Department notes that where an employer has a practice of 
continuing employees on different projects or grants where work is 
available, but of laying workers off if there is no work available that 
fits the worker's skills and later offering the worker work under a new 
contract when one becomes available, the Department would expect the 
employer to contact the U.S. worker and offer the position prior to 
petitioning for an H-1B worker for the position. The Department will 
closely examine such situations to determine if the U.S. worker has 
been unlawfully displaced, and if not, if the employer's failure to 
contact such former employees is a recruiting violation.
5. What Constitutes ``a Similar Employment Opportunity'' for a U.S. 
Worker, Which--if Offered--Would Not Constitute a Prohibited ``Layoff'' 
or Displacement of the Worker?
    Section 212(n)(4)(D)(i)(II) of the INA as amended by the ACWIA, 8 
U.S.C. 1182(n)(4)(D)(i)(II), provides that, even where an H-1B worker 
is placed in a job formerly held by a U.S. worker, no ``displacement'' 
or ``layoff'' is considered to have occurred if the U.S. worker was 
first offered but refused ``a similar employment opportunity with the 
same employer.''
    As stated by Congressman Smith: ``The intent of Congress is that 
the `similar employment opportunity with the same employer at 
equivalent or higher compensation and benefits' would be a meaningful 
offer.'' 144 Cong. Rec. E2324 (Nov. 12, 1998). Senator Abraham stated 
that it ``is the intent of Congress that the determination of 
similarity take into account factors such as level of authority and 
responsibility to the previous job, level within the overall 
organization, and other similar factors, but that it not include the 
location of the job opportunity.'' 144 Cong. Rec. S12750 (October 21, 
1998).
    In the NPRM, the Department described this provision as allowing a 
dependent employer an affirmative defense to its displacement of a U.S. 
worker if the employer can establish that it offered a bona fide 
transfer opportunity to the worker. The Department proposed that the 
U.S. worker would need to be offered not simply another job with a 
similar title, but that the offered position also carry with it 
attributes such as a similar level of authority and responsibility 
within the organization, a similar opportunity for advancement within 
the organization, similar tenure, and a similar work schedule.
    Four commenters responded to this proposal.
    The AFL-CIO asserted that by using the term ``employment 
opportunity'' rather than ``job'' or ``position,'' Congress intended 
that working conditions, such as schedules, worksite location, level of 
authority and discretion, and potential to advance, be factors that 
determine the similarity of opportunity, and that the term does not 
simply reflect a comparison of compensation and benefits. One commenter 
(Latour) urged the Department to be sensitive to the geographic needs 
of employers in administering this section of the ACWIA, noting that 
U.S. workers often are less willing to go to some localities than H-1B 
workers.
    Most of the factors listed by the AFL-CIO are included in the 
Interim Final Rule. The Department notes that, apart from the economic 
comparison proposed by the Department, as discussed in the next 
section, no commenter objected to the other illustrative factors 
proposed by the Department in measuring ``similar employment 
opportunity.'' AILA stated that it agreed that the factors listed by 
the Department in the NPRM are appropriate for determining the 
similarity of an employment opportunity offer. The AFL-CIO identified 
as an additional factor, ``the level of * * * discretion'' of the two 
positions, which, it asserted, should be taken into account. This 
factor, the Department believes, is inherent in any comparison between 
two jobs, and it has specifically included this factor in the Interim 
Final Rule.
    The Department has not included ``worksite location'' as an 
additional factor, as had been suggested by the AFL-CIO. The intended 
meaning of this term is not clear to the Department. To the extent it 
is intended to require a comparison of the relative costs of living in 
the areas of the jobs--a consideration discussed in the next section of 
the Preamble--the Department's proposal already accommodated the 
suggestion. If the AFL-CIO is suggesting that an employer should not be 
able to offer a job in a different geographic location, the Department 
disagrees with this suggestion. Although the ACWIA's language does not 
foreclose an interpretation that would require an offered position to 
be within the same geographic area in order to satisfy the test of 
``similarity,'' the Department believes that this would unnecessarily 
limit an employer's ability to restructure its operations in order to 
ensure that no U.S. workers are displaced by an H-1B worker. Although 
the Department has not included worksite location as an explicit 
consideration in evaluating similarity of the employment opportunity, 
the Department notes that the offer of a similar employment opportunity 
must be bona fide. The Department would not consider an offer to be 
bona fide if all of the facts and circumstances indicate it is designed 
to be rejected by the employee and therefore is a subterfuge for a 
layoff.
6. What Constitutes ``Equivalent or Higher Compensation and Benefits'' 
for a U.S. Worker, for Purposes of the Other Job Offer to That Worker 
so as to Not Constitute a Prohibited ``Layoff'' or Displacement? 
(Sec. 655.738(b)(1)(iv)(C))
    Section 212(n)(4)(D)(i)(II) of the INA as amended by the ACWIA, 8 
U.S.C. 1182(n)(4)(D)(i)(II), provides that no prohibited ``layoff'' of 
a discharged U.S. worker occurs if the U.S. worker is offered another 
employment opportunity with the same employer ``at equivalent or higher 
compensation and benefits than the position from which the employee was 
discharged.''
    Congressman Smith stated: ``It is Congress'' intent that an 
employer should not be able to evade attestation by making an offer of 
an alternative employment opportunity without considerations such as 
relocation expenses and cost of living differentials if the alternative 
position was in a different geographical location.'' 144 Cong. Rec. 
E2324 (Nov. 12, 1998). Senator Abraham stated that ``the determination 
of similarity * * * [does] not include the location of the job 
opportunity.'' 144 Cong. Rec. S12750 (Oct. 21, 1998).
    In the NPRM, the Department proposed that an ``opportunity'' could 
not be considered to provide ``equivalent or higher compensation and 
benefits,'' if that ``opportunity'' would provide the worker a lower 
disposable income, or would require the worker to incur expenses that 
drive down his financial standing. The Department also noted that 
Congress, by specifying ``equivalent or higher'' pay and benefits,

[[Page 80149]]

must have intended that the U.S. worker be offered a positive, rather 
than negative, ``employment opportunity.''
    The Department also proposed that, ``[a]ssuming the regulations 
provide that a `similar employment opportunity' may include a transfer 
to another commuting area,'' that opportunity must take into 
consideration matters such as cost of living differentials and 
relocation expenses (e.g., a New York City ``opportunity'' offered to a 
worker ``laid off'' in Kansas City). The Department also noted that it 
was considering whether it would be appropriate for this purpose to use 
principles adapted from regulations defining equivalent compensation 
and benefits under the Equal Pay Act and the Family and Medical Leave 
Act. See 29 CFR 1620; 29 CFR 825.215(c).
    The Department received five comments on this issue and its 
proposals.
    The AFL-CIO agreed with the Department's proposal, noting that a 
position resulting in an actual loss of ``real wages'' for a U.S. 
worker should not be considered equivalent compensation and benefits. 
The AFL-CIO also observed that a change of employment that results in 
higher dependent care costs for an employee has the same consequences 
of decreasing real wages as cost-of-living and relocation expenses.
    AILA, ITAA, the Chamber of Commerce, and Senators Abraham and 
Graham, on the other hand, contended that the Department's proposal 
that the cost of living and relocation costs should be considered in 
determining whether the offered job offers the employee ``equivalent or 
higher compensation and benefits'' is without support in the ACWIA, and 
that ``similarity'' should not take into account the geographic 
location of a job opportunity. The Chamber of Commerce noted that COLAs 
and other expenses will not necessarily increase with an offer of 
similar employment, such as where the position offered to the U.S. 
worker is located in an area with lower costs than the position from 
which he has been or will be laid off.
    The Department believes that whether an employment opportunity 
provides equivalent or higher compensation and benefits requires 
consideration of the costs associated with the location of the jobs, 
i.e., if the employment opportunity takes into consideration both the 
cost of living and any costs expenditures necessary to relocate to 
another location. The Department believes this accords with the most 
natural meaning of the provision. The Department does not believe that 
an employment opportunity can be bona fide if it does not take into 
consideration these costs which would erode compensation under the job 
offer.
    The Department disagrees with the argument that Congress, by 
prescribing a geographical condition in section 212(n)(4)(B) for 
determining if a job offer would provide ``equivalent or higher 
compensation'' of the job offered to a U.S. worker, but not in section 
212(n)(4)(D)(i)(II), evinced an intention that the jobs' locations are 
to be disregarded in making this latter comparison. The Department 
notes that the two provisions measure different aspects of the 
employer's displacement obligation. The first provision defines the 
universe of jobs which should be compared to determine if a 
displacement has taken place as those within the same geographical 
area. The second provision compares the equivalency of jobs which the 
U.S. worker occupies and is offered. The Department certainly does not 
believe that where the statutory language in one provision explicitly 
restricts the comparison to the same locality and in another provision 
it is silent, it follows that the cost of relocation and the cost of 
living cannot be taken into consideration in determining the 
equivalency of compensation between two positions in different 
localities. In fact, the Department believes that a more appropriate 
inference would be that Congress intended no such limitation.
    The Department, in determining whether a bona fide job offer was 
made, does not intend to second-guess an employer's reasonable good-
faith efforts to achieve economic comparability. Ordinarily this could 
be achieved if the job offer takes into account cost of living 
adjustments between localities and relocation costs which the employer 
ordinarily provides. If such cost of living adjustments are not 
ordinarily provided by the employer, the Department would accept an 
adjustment based on any published index of pay differentials or cost of 
living, or use of the adjustments provided by the Federal Government to 
its employees. In this regard, the Department agrees with the 
observation by the Chamber of Commerce that if the transfer is to an 
area with a less expensive cost of living, an employer may offer a 
position at a reduced rate of pay, provided this accords with the 
employer's normal policy.
    AILA urged the Department not to adopt the EPA and the FMLA 
standards for equivalency. AILA objected to the use of the FMLA 
standard on the basis that it requires ``virtual identity,'' rather 
than the ACWIA's test of ``substantial equivalence.'' With regard to 
the possible use of the EPA regulations, AILA stated that its use would 
be inappropriate because ``substantial equivalence'' would be defeated 
whenever a job offered was located in another geographic area. AILA, 
instead, requested that ``equivalent or higher'' be determined on a 
case-by-case basis, in light of all circumstances of the job offer.
    The Department notes that AILA has misstated the relevant ACWIA 
standard, which is ``equivalent or higher compensation and benefits,'' 
not ``substantial equivalence.'' The Department continues to believe 
that both EPA and FMLA regulations provide a proper basis for making 
the comparison of compensation and benefits, although the FMLA 
regulations are somewhat less useful since they provide less detailed 
guidance in making an economic comparison of jobs. Accordingly, the 
Interim Final Rule is based on the following principles drawn from the 
EPA regulations, 29 CFR 1620.10: Wages include:

    ``all payments made to [or on behalf of] an employee as 
remuneration for employment [e.g., ] all forms of compensation 
irrespective of the time of payment, whether paid periodically or 
deferred until a later date, and whether called wages, salary, 
profit sharing, expense account, monthly minimum, bonus, uniform 
cleaning allowance, hotel accommodations, use of company car, 
gasoline allowance, or some other name. Fringe benefits are deemed 
to be remuneration for employment. * * * Thus, vacation and holiday 
pay, and premium payments for work on Saturdays, Sundays, holidays, 
regular days of rest or other days or hours in excess or outside of 
the employee's regular days or hours of work are deemed remuneration 
for employment * * *.''

Consistent with 29 CFR 1620.11(a), ``fringe benefits'' include, e.g., 
such benefits as medical, hospital, accident, life insurance and 
retirement benefits; profit sharing and bonus plans; leave; and other 
such benefit programs.
    While the Department's interpretation allows for an inclusive 
definition of compensation and benefits, the Department expects that 
since the comparison will involve jobs with the same business, the 
benefit components of the employee's compensation often will be the 
same, leaving the cost of living differential as the sole or primary 
variable in most situations. As discussed above, the regulations 
specifically allow the job opportunity to be in a different locality, 
provided there is an adjustment for cost of living, and relocation 
costs are paid.

[[Page 80150]]

7. What Is Required of an H-1B-Dependent Employer or Willful Violator 
Which Seeks to Place H-1B Workers at a Secondary Employer's Worksite? 
(Sec. 655.738(d))
    Section 212(n)(1)(F) of the INA as amended by the ACWIA, 8 U.S.C. 
1182(n)(1)(F), requires that H-1B-dependent employers and willful 
violators not place any H-1B worker at another employer's worksite 
``unless the [H-1B] employer has inquired of the other employer as to 
whether, and has no knowledge that * * * the other employer has 
displaced or intends to displace a United States worker employed by the 
other employer'' within the period beginning 90 days before and 
continuing until 90 days after the H-1B worker's placement at that 
worksite. This requirement applies where there are ``indicia of an 
employment relationship'' between the H-1B worker and the customer-
client of the dependent employer. section 212(n)(1)(G)(ii) further 
provides: ``The [LCA] application form shall include a clear statement 
explaining the liability under subparagraph (F) of a placing employer 
if the other employer * * * displaces a United States worker. * * *'' 
Additionally, section 212(n)(2)(E) provides that where an H-1B-
dependent employer places a non-exempt H-1B worker with another 
employer in accordance with section 212(n)(1)(F) (i.e., after having 
made the required inquiry), ``such displacement shall be considered * * 
* a failure, by the placing employer, to meet a condition specified [in 
an LCA]. However, the employer may not be debarred unless the Secretary 
finds that the placing employer ``knew or had reason to know of such 
displacement at the time of the placement,'' or the employer has been 
sanctioned ``based upon a previous placement of an H-1B nonimmigrant 
with the same other employer.''

    In explaining these provisions and their interrelationships 
Congressman Smith stated: ``* * * [T]he legislation prohibits a 
covered employer in certain circumstances from placing an H-1B 
nonimmigrant with another employer where the `other' employer has or 
will displace an American worker. * * * Congress intends that the 
employer make a reasonable inquiry and give due regard to available 
information. Simply making a pro forma inquiry would not insulate a 
covered employer from liability should the `other' employer displace 
an American worker from a job sufficiently similar to the one which 
would be performed by an H-1B worker. That is one of the reasons why 
subsection 412(a)(2) of the legislation requires that the employer 
be notified through a clear statement on the labor condition 
application (LCA) regarding the scope of a covered employer's 
liability with respect to a lay off by a secondary employer. Through 
the LCA form, the Department of Labor will make clear to covered 
employers their obligation to exercise due diligence in ascertaining 
whether the placement of H-1B nonimmigrants may correspond with the 
lay off or displacement of American workers in similar jobs. Some of 
the most egregious cases involving the abuse of the H-1B visa 
program have involved American workers being retained only long 
enough to train their H-1B replacements under contract with a 
different employer. * * *''

144 Cong. Rec. E2324 (Nov. 12, 1998).
    Similar statements were made by Senator Abraham:

    In particular, the covered employer must promise to inquire 
whether the other employer will be using the H-1B worker to displace 
a U.S. worker whom the other employer had laid off or intends to lay 
off within 90 days of the placement of the H-1B worker. The covered 
employer must also state that it has no knowledge that the other 
employer has done so or intends to do so.

144 Cong. Rec. S12751 (Oct. 21, 1998).
    Congressman Smith and Senator Abraham agreed that an employer who 
makes the required inquiries remains liable if the other employer 
displaces U.S. workers notwithstanding the inquiry made. Thus 
Congressman Smith stated:

    ``If the other employer has displaced an American worker (under 
the definitions used in this legislation) during the 90 days before 
or after the placement, the attesting employer is liable as if it 
had violated the attestation.
    ``In all instances, the sanction may be an administrative remedy 
(including civil monetary penalties and `make-whole' remedies to the 
American worker affected). The attesting employer can only receive a 
debarment, however, if it is found to have known or to have had 
reason to know of the secondary displacement at the time of the 
placement of the H-1B worker with the other employer, or if the 
attesting employer was previously sanctioned for a secondary 
displacement under 212(n)(2)(E) for placing an H-1B nonimmigrant 
with the same other employer. If an employer has conducted the 
required inquiry prior to any placement with a ``secondary'' 
employer, and has no information or reason to know of that 
employer's past or intended displacement of U.S. workers, then the 
attesting employer should ordinarily be presumed not to have 
willfully violated the secondary displacement attestation. Congress 
anticipates that the Department of Labor, in promulgating and 
enforcing regulations, would require a reasonable level of 
inquiry.''

144 Cong. Rec. E2327 (Nov. 12, 1998).
    Similarly, Senator Abraham stated:

    ``Making the required inquiries will not insulate a covered 
employer from liability should the secondary employer with which the 
covered employer is placing the covered H-1B worker turn out to have 
displaced a U.S. worker from the job that it has contracted with the 
covered employer to have the H-1B worker fill. That is why 
subsection 412(a)(2) of this legislation adds a new requirement to 
section 212(n)(1) that the application contain a clear statement 
regarding the scope of a covered employer's liability with respect 
to a layoff by a secondary employer with whom the covered employer 
places a covered H-1B worker. * * * If the other employer has 
displaced a U.S. worker (under the definitions used in this 
legislation) during the 90 days before or after the placement, the 
attesting employer is liable as if it had violated the attestation. 
The sanction is a $1,000 civil penalty per violation and a possible 
debarment. The attesting employer can only receive a debarment, 
however, if it is found to have known or to have had reason to know 
of the displacement at the time of the placement with the other 
employer, or if the attesting employer was previously sanctioned 
under 212(n)(2)(E) for placing an H-1B nonimmigrant with the same 
employer. If an employer has conducted the inquiry that it is 
required to attest that it has conducted before any such placement, 
and (as that attestation requires) acquired no knowledge of 
displacement of a U.S. worker in the course of that inquiry, it 
should ordinarily be presumed not to have known or have reason to 
know of a displacement unless there is an affirmative showing that 
it did have such knowledge or reason to know.''

144 Cong. Rec. S12750, S12751 (Oct. 21, 1998).
    In order to achieve the purposes of this provision, the Department 
proposed to develop a regulatory provision which requires that the H-1B 
employer make a reasonable effort to inquire about potential secondary 
displacement. The NPRM set out a non-exclusive list of methods that 
could be used by an employer to demonstrate its efforts to assure 
compliance with its inquiry obligation. The methods suggested included 
obtaining a written assurance from the secondary employer that it does 
not intend to displace a similarly-employed U.S. worker during the 90-
day period before or after the placement of the H-1B worker; a written 
memorialization of such a verbal assurance; or the inclusion of a non-
displacement clause in a contract with the secondary employer. The NPRM 
noted that the Department had read the language and structure of the 
statutory provisions to reflect an intention that a dependent employer 
must take pro-active steps to determine whether the placement of H-1B 
workers would correspond with the layoff of similarly-employed U.S. 
workers. The NPRM proposed that an employer, even with the receipt of a 
``no displacement'' assurance, should not be able to ignore other 
information, coming to its attention before placement of the H-1B 
worker, that calls into question the original assurance. The Department

[[Page 80151]]

proposed that in such circumstances the dependent employer would be 
expected to recontact its customer and obtain credible assurances that 
layoffs have not occurred or are planned during the relevant statutory 
time frame.
    Several commenters responded to the Department's proposals on this 
issue.
    One commenter (TCS) generally agreed with the Department's 
approach, urging the Department to clarify that usually all that will 
be required of a dependent employer is to make the layoff inquiry with 
its customer and to memorialize the customer's response. ITAA stated 
that it found helpful the Department's identification of a variety of 
methods by which an employer may satisfy its inquiry obligation.
    The AFL-CIO asserted that a refusal by a secondary employer to 
respond to the staffing firm's inquiry should result in the 
disqualification of that LCA. ACE and IEEE stated their belief that the 
Department's proposal puts an unfair burden on the placing employer and 
that, at the very least, the secondary employer should share liability 
for violation of the displacement provision. The IEEE expressed 
particular concerns regarding the effect of the Department's approach 
on smaller businesses. Two other commenters (BRI and Cooley Godward) 
asserted that the NPRM neglected to address the treatment of primary 
employers who, despite reasonable efforts, receive no or an inadequate 
response from the secondary employer. BRI requested that the final 
regulation address a ``reasonable minimal effort'' threshold.
    AILA, Rapidigm, and Satyam contended that getting written 
assurances from secondary employers will jeopardize negotiations and 
placement of H-1B workers. Rubin & Dornbaum and White Consolidated 
Industries, on the other hand, stated that although only H-1B-dependent 
employers and willful violators need obtain assurances, the effect of 
that requirement is to impose a paperwork requirement on the secondary 
employer.
    AILA asserted that the proposal, in effect, required a dependent 
employer to conduct an ``interrogation'' of its customer regarding its 
layoff plans in order to satisfy its non-displacement obligation, and 
stated that the proposal lacked ``an articulable point at which the H-
1B employer is deemed to have made sufficient, reasonable efforts.'' 
AILA requested that the Department allow flexibility to ascertain 
whether there is a realistic possibility of displacement, such as where 
the H-1B worker is only providing services for a special project or on 
a short-term basis.
    The Department has given careful consideration to the divergent 
comments received on this proposal. The expressed concern regarding the 
impact which the inquiry will have upon the dependent employer's 
ability to place H-1B workers, in the Department's view, is misplaced. 
The obligation has been imposed by Congress as a condition for the 
employment of H-1B workers by H-1B-dependent employers and willful 
violators. While a dependent employer has discretion as to how it will 
meet this obligation, it must make the inquiry in every case where 
there will be indicia of an employment relationship (see IV.D.2, 
above).
    The Department is not persuaded that its proposal imposes any undue 
burden on dependent employers or their customers. The Department 
believes that the statute contemplates due diligence in the inquiry, 
taking into consideration the circumstances of the case, rather than 
just a pro forma inquiry. Ordinarily, if the customer provides the 
assurance and there is no reason to suspect to the contrary--as where 
the project is only for a short-term, to satisfy a special need--an 
employer would need only make the relevant inquiry of its customer and 
memorialize the customer's intention not to displace any U.S. workers. 
The Department does not believe that the nature of the inquiry creates 
a significant burden in those instances where there is no reason to 
believe that a displacement may be contemplated. On the other hand, if 
the employer has any reason to believe the secondary employer may 
displace its employees--as where the H-1B workers will be performing 
services that the secondary employer performed with its own work force 
in the past--a greater inquiry may be necessary. The Department notes 
that the employer is not constrained by the Department's examples; it 
can choose an alternative means to assure itself that there will not be 
displacement and to minimize its potential liability, such as by an 
indemnity clause, as suggested by IEEE.
    Furthermore, the Department has no reason to believe that the 
customer would have difficulty in answering the inquiry, especially 
where no layoffs are contemplated. If a customer balks at providing the 
lay-off information--an unlikely circumstance given the customer's 
demonstrated operational needs--the ACWIA does not allow the dependent 
employer to place an H-1B worker with that customer.
    The Department disagrees with ACIP's contention that the 
Department's proposal effectively dictates contract terms through 
regulation and as such imposes an unauthorized and unwarranted burden. 
So long as the dependent employer meets its inquiry obligation and it 
does not have reason to believe there may be displacement, it is free 
to structure its contractual arrangements with its customers as it 
chooses.
    The AFL-CIO commented that the Department had set ``an incredibly 
low bar'' for employers to meet this obligation, urging that the 
inquiry requirements should be supplemented by imputing knowledge of 
public facts about the actions and intentions of secondary employers to 
the H-1B-dependent employer. On the other hand, ITAA expressed concern 
that an employer would be held accountable for any public information 
relative to a layoff that might call into question a customer's 
assurance that it had no layoff plans--even where the information is 
buried in a local newspaper outside the area where the placing employer 
is based.
    The Department disagrees with the suggestion that it should impute 
to the employer any public knowledge that layoffs by the customer had 
or would occur. With regard to this matter, the statute sets up a 
reasonableness standard. Although the H-1B employer is liable for civil 
money penalties and other appropriate remedies in every case where a 
displacement violation occurs, the ACWIA limits the imposition of the 
debarment sanction to circumstances where the H-1B employer ``knew or 
had reason to know of such displacement at the time of placement of the 
nonimmigrant with the other employer.'' Section 212(n)(2)(E)(i). Such a 
determination obviously will depend upon the particular circumstances 
presented, including the nature of the inquiry conducted by the 
employer. The Department established no presumptions about the 
employer's knowledge of public information, including newspaper 
articles. On the other hand, the employer cannot put its head in the 
sand and feign ignorance or disregard information that comes to its 
attention through the press or otherwise. As the proposal stated, 
``[Where a] placing H-1B employer [receives information] such as 
newspaper reports of relevant layoffs by the secondary employer * * * 
the [placing] employer would be expected to recontact the secondary 
employer and receive credible assurances that no layoffs are planned or 
have occurred in the applicable time frame.''
    ACIP asserted that the secondary employer might be unwilling to 
assist the placing employer if the latter were

[[Page 80152]]

investigated by the Department. It suggested that the receiving 
employer should be allowed to participate as an intervener in an 
enforcement proceeding involving an alleged displacement violation. The 
Department notes that pursuant to 20 CFR 655.815, service of the 
Administrator's determination is made on known interested parties, and 
that any interested party may request a hearing or participate in the 
proceeding (20 CFR 655.820). The Department believes that the secondary 
employer who has allegedly displaced a U.S. worker would generally 
qualify as an interested party even though it is not directly liable 
under the ACWIA. See also the rules of practice of the Office of 
Administrative Law Judges, which provide a right to participate in a 
proceeding where the ALJ determines that ``the final decision could 
directly and adversely affect [the applicants for participation] * * *, 
and if they may contribute materially to the disposition of the 
proceedings and their interest is not adequately represented by 
existing parties.'' 29 CFR 18.10(b).
    ITAA requested a ``safe harbor'' provision for employers who make a 
demonstrated (i.e., written agreement with secondary employer) good-
faith effort to ascertain that no layoffs have occurred or will occur. 
ACIP and AILA urged the Department to include regulatory language to 
the effect that good faith efforts to cure violations should preclude 
sanctions.
    The Department's discretion in this area is limited. The ACWIA 
imposes strict liability upon a dependent employer where a U.S. worker 
is displaced by a secondary employer. Section 212(n)(2)(E) specifically 
provides: ``If an H-1B-dependent employer places a non-exempt H-1B 
worker with another employer * * *, such displacement shall be 
considered * * * a failure by the placing employer, to meet a condition 
[of its LCA].'' At the same time, the ACWIA's three-tier penalty 
provisions require consideration of a violator's culpability which 
should minimize the liability of a dependent employer who has acted in 
good faith to comply with its displacement obligation. Additionally, 
the Department notes that the regulatory provisions applicable to the 
assessment of civil money penalties consider an employer's ``good 
faith'' as a factor affecting the level of the penalty assessed. See 20 
CFR 655.810(b).
8. What Documentation Will be Required of Employers About the ACWIA's 
Non-Displacement Provisions? (Sec. 655.738(e))
    In order to assure compliance with the ACWIA's non-displacement 
provisions, the Department proposed to require that an H-1B-dependent 
employer or willful violator retain certain documentation with respect 
to any U.S. workers (in the same locality and same occupation as any H-
1B nonimmigrants it hired) who left its employ in the period 90 days 
before or after the employer's petition for the H-1B worker(s), and for 
any employees with respect to whom the employer took any action in the 
180-day period to cause the employee's termination. The NPRM proposed 
that for all such employees, these documents must include: The 
employee's name, last-known mailing address, occupational title and job 
description; any documentation concerning the employee's experience, 
qualifications, and principal assignments; notification by the employer 
regarding termination and the employee's response; job evaluations; and 
information regarding offers of similar employment and the employee's 
response. The Department noted its belief that these records are 
required to be retained by EEOC regulations, 29 CFR 1602.14, therefore 
their retention would not present an additional burden on employers.
    The Department received four comments on this proposal.
    ITAA stated that it does not object to any documentation retention 
already mandated. It stressed the distinction between maintaining 
records already created and creating records. Senators Abraham and 
Graham asserted that the ACWIA imposes no requirement of maintaining 
records of job offers made to departing employees as proposed by the 
Department. Two commenters (AILA, Chamber of Commerce) stated their 
belief that the proposal imposes new record creation and retention 
burdens, disagreeing with the Department's assessment that the EEOC 
already requires the retention of such documents. The Chamber of 
Commerce stated that this burden will unduly impact upon small 
businesses that normally do not maintain such records.
    The Department notes that pursuant to Sec. 655.731(b), employers 
are already required to maintain basic payroll information for all 
employees in the specific employment at the place of employment, 
including name, home address, and occupation. This information is also 
required by other statutes such as the Fair Labor Standards Act and the 
Equal Pay Act. See 29 CFR 516.2; 29 CFR 1620.32. The Department does 
not believe that any prudent business person would fail to have such 
information.
    The commenters correctly recognized that the EEOC regulation cited 
in the NPRM, 29 CFR 1602.14, does not establish a general requirement 
that employers create the records encompassed by the Department's 
displacement proposal. Section 1602.14 instead, requires the 
preservation of records, for purposes of Title VII of the Civil Rights 
Act of 1964 and the Americans with Disabilities Act (ADA), where the 
employer chooses to make or keep personnel records, including 
situations where an employee is involuntarily terminated, or a 
discrimination charge is filed against the employer. As noted, 
Sec. 1602.14 does not require an employer to create any records, but 
rather requires an employer to preserve all personnel or employment 
records which the employer ``made or kept.'' The Department believes 
that every prudent employer would ``make or keep'' the described 
records relating to the circumstances in which employees leave their 
employ. Once made or kept (i.e., where records received from others are 
not immediately discarded), EEOC regulations require that these records 
be preserved.
    Furthermore, the EEOC does require the preservation of the same or 
similar records under other statutes it administers, whether or not 
they would otherwise be kept. Under the Age Discrimination in 
Employment Act (ADEA), for example, there is an obligation to retain 
certain records and an obligation to retain broad categories of 
personnel documents which an employer ``in the regular course of his 
business, makes, obtains, or uses.'' 29 CFR 1627.3. In particular, 
employers are required to retain any and all documents it makes, 
obtains, or uses regarding ``[p]romotion, demotion, transfer, selection 
for training, layoff, recall, or discharge of any employee, * * *.''
    Against this regulatory backdrop, it is clear that employers 
already are required by the EEOC, pursuant to Title VII and the ADEA, 
to retain (i.e., preserve) the personnel documents that are encompassed 
by the Department's proposal for documenting an employer's displacement 
compliance. The Department repeats that it is not requiring employers 
to create any documents other than basic payroll information.
    The Interim Final Rule provides that, for the purposes of meeting 
the

[[Page 80153]]

ACWIA's displacement requirements, a dependent employer or willful 
violator is required to preserve the following documents with respect 
to any U.S. worker(s) (in the same area of employment and occupation as 
any H-1B nonimmigrants) who left its employ in the period 90 days 
before or after the employer's petition for the H-1B nonimmigrant(s), 
and for any U.S. worker(s) with respect to whom the employer took any 
action during that 180-day period to cause the employee's termination 
(e.g., a notice of termination): any documentation concerning the 
employee's experience, qualifications, and principal assignments; 
notification by the employer or the employee regarding the termination 
of employment and any response thereto; and job evaluations. The 
Department explains that the employer is not required to create any 
such records, if they do not exist.
    In addition, if the employer offers the U.S. worker another 
employment opportunity, the employer shall maintain a record of the 
offer, including the position offered and terms of compensation and 
benefits, and the employee's response thereto. The Department believes 
that most employers would make such offers in writing, but recognizes 
that there may be a small burden to the employer in keeping a record if 
the employee response is not in writing. The Interim Final Rule 
continues the practice under the current regulations of applying a 
uniform period for retaining documentation required by this part. See 
Sec. 655.760(c).
    The Department wishes to clarify, as it has with regard to other 
documentation proposals in this part, that an employer is not required 
to retain these records in any particular form so long as they are 
maintained and retrievable upon this Department's request in accordance 
with the requirements of 29 CFR 516.1(a) (setting forth recordkeeping 
requirements under the FLSA, including the EPA). The Department also 
wants to make clear that such records need not be kept in the 
employer's LCA public access file.
    As discussed in IV.D.7, the Interim Final Rule also requires 
employers to document their inquiry to secondary employers and any 
response. This inquiry may be done in any manner the employer deems 
appropriate under the circumstances. However, if the inquiry and 
response were not in writing, the employer will be required to keep a 
written memorandum detailing the substance of the conversation, the 
date of the communication, and the names of the individuals involved in 
the conversation.

E. What Requirements Does the ACWIA Impose Regarding Recruitment of 
U.S. Workers, and Which Employers are Subject to Those Requirements? 
(Sec. 655.739)

    Section 212(n)(1)(G)(i)(I) of the INA as amended by the ACWIA, 8 
U.S.C. 1182(n)(G)(i)(I), requires that an H-1B-dependent employer or an 
employer found by DOL to have committed willful H-1B violations take 
``good faith steps to recruit, in the United States using procedures 
that meet industry-wide standards and offering compensation that is at 
least as great as that required to be offered to H-1B nonimmigrants * * 
*, United States workers for the job for which the nonimmigrant or 
nonimmigrants is or are sought.'' The Department is charged with 
enforcing the recruitment obligation, while the Attorney General 
administers a special arbitration process to address complaints 
regarding an H-1B employer's companion obligation to ``offer the job to 
any United States worker who applies and is equally or better qualified 
for the job for which the nonimmigrant or nonimmigrants is or are 
sought.'' The ACWIA further provides that ``nothing in subparagraph (G) 
[the new attestation element] shall be construed to prohibit an 
employer from using 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.''
    The recruitment requirement does not apply where the LCA solely 
involves ``exempt'' H-1B workers (see Section 212(n)((1)(E)(ii)). In 
addition, the recruitment requirement does not apply to an application 
filed on behalf of an H-1B worker described in Section 
203(b)(1)(A),(B), or (C) of the INA. Section 203(b)(1) establishes the 
first preference among employment-based immigrants to the United 
States. This group includes aliens with extraordinary ability, aliens 
who are outstanding professors and researchers, and aliens who have 
been employed by multinational corporations as executives or managers 
who will enter the U.S. to continue to provide executive or managerial 
services to the same employer or to its subsidiary or affiliate.
    The Department noted in the NPRM that the literal language of the 
recruitment provision would require recruitment efforts be undertaken 
before an LCA is filed (``prior to filing the application--[the 
employer] has taken good faith steps to recruit''). The Department 
noted that this language appears to have been based on a presumption 
that employers file LCAs for individual workers at the time that need 
arises (see, e.g., the statements by both Senator Abraham and 
Congressman Smith that an employer must state that it has taken good 
faith steps to recruit U.S. workers ``for the job or which it is 
seeking the H-1B worker'' (144 Cong. Rec. S12751 (Oct. 21,1998); 144 
Cong. Rec. E2324 (Nov. 12, 1998))--a presumption that is contrary to 
the actual, longstanding practice of many employers in the H-1B 
program. Under the Department's regulations, Secs. 655.730, .750, an 
LCA is in effect for three years and an employer is permitted to file 
an LCA for multiple positions so that it may use the LCA, during the 
three-year period it is in effect, to support future H-1B petitions 
when the actual need for employment arises. Many employers avail 
themselves of this procedure.
    In light of this common practice (which had not been at issue in 
crafting the ACWIA), the Department set forth its view that it would 
not be reasonable to assume that Congress intended to require a 
separate LCA for each worker; nor was it reasonable to assume that 
Congress intended that the employer would already have recruited in 
good faith for every position it would fill over the three-year life of 
the LCA, and offered a job to every equally or better qualified U.S. 
worker who applied for each such position. The Department observed that 
this would be virtually impossible since employers would not yet have 
identified every job opportunity which would arise in the future.
    Thus, the Department proposed that ``the `good faith' recruitment 
attestation must be read, interpreted, and applied to mean that the 
employer promises--and agrees to be held accountable--that it has, or 
will recruit with respect to any job opportunity for which the 
application is used, whether that recruitment occurs before or after 
the application is filed (if the application is to be used in support 
of multiple petitions for future workers).'' The Department invited 
comments on this approach and any alternative approaches to 
appropriately balance employers' good faith recruitment obligations in 
the context of the statutory language.
    The Department received no comments on this proposal from the 
employer community. The AFL-CIO, on the other hand, objected to this 
proposal, stating, in effect, that Congress intended that the good 
faith recruitment requirement be satisfied as a precondition to filing 
an LCA, not

[[Page 80154]]

merely a promise of future compliance with this obligation. The AFL-CIO 
contends that the three-year validity period of the LCA is in direct 
conflict with the worker protection requirements of the ACWIA, and 
suggests that the goal of protecting workers would be best served by a 
six-month validity period.
    The Department disagrees with this view, noting that the AFL-CIO's 
interpretation would upset a long-settled practice that has promoted 
the efficient processing of LCAs, a goal which the ACWIA was not 
intended to impede. Furthermore, the House Report on H.R. 3736, whose 
language on recruitment is very similar to that in ACWIA as enacted, 
and is identical with respect to the timing of the recruitment, states 
that the bill ``endeavors to protect American workers by ensuring that 
companies at least make an attempt to locate qualified American workers 
before petitioning for foreign workers under the H-1B program.'' H.R. 
Rep. No.105-657, 105th Cong., 2d Sess. 47 (1998) (emphasis added). In 
the absence of any suggestion that Congress intended this result, the 
Department is unpersuaded that Congress intended the recruitment 
provision to be applied literally. Without drastically reducing the 
effective period of the LCA or limiting the LCA to a single job 
opportunity, the Department believes that it would be virtually 
impossible for major users of the program--namely the H-1B-dependent 
employers to whom the provision applies--to comply with the AFL-CIO's 
construction of the Act.
    The Department received one comment that addressed the ``first 
preference'' exception to the recruitment obligation. The commenter 
(Cooley Godward) expressed the concern that an employer's utilization 
of this provision may prove problematic because determinations of 
``first preference'' status require discretionary judgments, typically 
exercised by the INS, which if applied incorrectly by an employer, 
could subject the employer to sanctions for violating its recruitment 
obligation. Cooley Godward recommended that the Department promulgate a 
regulation that would protect employers who have made a reasonable good 
faith determination that an employee would qualify for first preference 
immigration status.
    The Department agrees that such determinations might be problematic 
in some rare cases. The Department believes that it is likely that H-1B 
nonimmigrants who would meet the first-preference criteria would also 
be ``exempt H-1B nonimmigrants'' for purposes of LCA designations and 
obligations. The Department will consult with the INS if the issue of 
``first preference'' status arises, and will take into account the 
employer's good faith efforts in any assessment of appropriate 
remedies.

1. How Are ``Industry-wide Standards'' for Recruitment To Be 
Identified? (Sec. 655.739(e))

    The INA, at section 212(n)(1)(G)(i)(I), requires a dependent 
employer to attest that it ``has taken good-faith steps to recruit in 
the United States using procedures that meet industry-wide standards * 
* * United States workers for the job for which the nonimmigrant or 
nonimmigrants is or are sought.''
    In discussing the meaning of this provision, Congressman Smith 
stated:

    ``Congress intends for an employer to at least use industry-wide 
recruiting practices (unless the employer's own recruitment 
practices are more successful in attracting American workers), and, 
in particular, to use those recruitment strategies by which 
employers in an industry have successfully recruited American 
workers. The Department of Labor, in defining and determining 
whether certain recruitment practices meet the statutory 
requirements, should consider the views of major industry 
associations, employee organizations, and other interest groups.''

144 Cong. Rec. E2324 (Nov. 12, 1998). Senator Abraham stated, on the 
other hand, that this provision ``allows employers to use normal 
recruiting practices standard to similar employers in their industry in 
the United States; it is not meant to require employers to comply with 
any specific recruitment regimen or practice, or to confer any 
authority on DOL to establish such regimens by regulation or 
guideline.'' 144 Cong. Rec. S12751 (Oct. 21, 1998).
    Consistent with these statements, the Department stated in the NPRM 
that ``[t]he statute does not require employers to comply with any 
specific recruitment regimen or practice, [and the Department does not] 
believe it is authorized to prescribe any explicit regimen.'' The 
Department also proposed that the benchmark ``industry-wide standards'' 
requires the employer's recruitment efforts be ``at a level and through 
methods and media which are normal, common or prevailing in an industry 
* * * including at least the medium most prevalently used in the 
industry and shown to have been successfully used by employers in an 
industry * * * to recruit U.S. workers.'' The Department explained that 
``industry-wide standards'' does not refer to the lowest common 
denominator among employers in a particular industry, i.e., the minimum 
or least effective recruitment methods used by companies in an industry 
to recruit U.S. workers. The Department solicited the views of major 
industry associations, employee organizations and other interest groups 
concerning successful recruitment practices and strategies.
    The NPRM identified a number of recruitment methods recognized as 
appropriate for recruiting U.S. workers (e.g., advertising in 
publications of general interest, advertising in trade and professional 
journals, advertising on Internet sites such as the Department's own 
``America's Job Bank,'' use of public and private employment agencies, 
including ``headhunters,'' outreach to educational and trade 
institutions, job fairs, and development and selection from among the 
employer's own workforce). The Department further stated its 
expectation that good faith recruitment ordinarily will involve several 
of these methods, ``both passive (where potential applicants find their 
way to an employer's job announcements, such as to advertisements in 
the publications and the Internet) and active (where the employer takes 
proactive steps to identify and get information about its job openings 
into the hands of potential applicants, such as through job fairs, 
outreach at universities, use of ``headhunters,'' and providing 
training to incumbent employees in the organization).''
    The NPRM requested comment on a proposed presumption of good faith 
recruitment where the employer in good faith used a mix of prescribed 
recruiting methods (at least three, one or two of which are active). 
This presumption would be available to employers who did not want to go 
to the trouble of demonstrating that their recruitment methods meet the 
standards for their industry.
    Under the proposal, an employer would not have to avail itself of 
the presumption, but good faith recruitment, at a minimum, would need 
to involve ``advertising in relevant and appropriate print media or the 
Internet (where common in the industry), in publications and at 
facilities commonly used by the industry * * *, as well as solicitation 
of U.S. workers within an employer's organization.'' The Department 
also expressed the view that there should be a general recognition that 
good faith recruitment must ``involve some active methods of 
solicitation, rather than just passive methods such as posting job 
announcements at the employer's worksite(s) or on its Internet web 
page.''
    Finally, the Department proposed that employers utilize recruitment 
methods

[[Page 80155]]

that are used by employers competing for the same potential workers, 
e.g., a hospital, university, or software development firm would be 
required to use the standards developed by the health care, academic, 
or information technology industries for the occupations targeted for 
recruitment. Similarly, a staffing firm seeking to place workers at 
other employers' worksites would be required to utilize the standards 
of the industry in which it seeks to place workers, not the standards 
that exist within the staffing firm's own industry.
    Thirty-two commenters, including 21 individuals, responded to the 
Department's proposals relating to ``industry-wide standards.''
    The individuals were consistent in urging the Department to 
strengthen recruitment requirements. They generally urged that, at a 
minimum, posting job openings in major publications, trade journals, 
state employment service offices, and local colleges be a prerequisite 
to the issuance of H-1B visas for particular workers. Many of these 
individuals also urged a requirement that a company expend a minimum 
amount, such as $1,000, on advertising a position as a precondition to 
petitioning for an H-1B nonimmigrant.
    APTA, AOTA and IEEE supported the Department's proposals. AOTA 
stated its belief that it is especially important to require employers 
to undertake several methods of active recruitment, and that those 
methods comport with those undertaken by the specific industry. IEEE 
agreed specifically with the requirement that employers be held 
accountable for recruiting for each job they fill under an LCA and with 
the Department's listed methods of recruitment and standards for good 
faith steps.
    The AFL-CIO opposed the idea of a presumption, noting that it is 
wrong to assume that some arbitrary combination of recruitment methods 
will equate with the ``industry-wide standards.'' In this regard, the 
AFL-CIO suggested that for some industries, including the information 
technology industry, no form of passive recruiting should be considered 
to meet the industry-wide standard.
    The AFL-CIO endorsed the Department's proposal that employers must 
conform their recruitment practices to those used within the industry 
for which the workers are sought. It stated that staffing firms must 
conform to the methods used by the industry in which they are seeking 
to place workers, not the methods used by employers within the staffing 
industry.
    Senators Abraham and Graham, ACIP, AILA, and TCS contended that the 
Department's proposed presumption represented an attempt to prescribe a 
specific regimen, contrary to the statute's intent to allow employers 
to use recruiting practices similar to other employers in the industry. 
The common thread through employer, trade association, and attorney 
comments was that there is no single template for recruitment to fit 
all situations, and that recruitment procedures vary by industry, size, 
geographic location, and market conditions. One commenter (Simmons) 
asserted that the Department's recruitment proposal will set up an 
infrastructure that some small employers and foreign-based employers 
will be unable to meet.
    A number of commenters responded to the Department's proposal that 
an employer use a combination of approaches, some of which must be 
proactive. The IEEE agreed with the Department's approach, stating that 
this approach would ensure a ``fair and level playing field'' for all 
applicants by requiring that employers utilize methods that do not skew 
the process against U.S. workers or otherwise put them at a 
disadvantage in competing against H-1B workers for positions covered by 
an LCA. One commenter (Hammond), though expressing the view that the 
statutory requirement that an employer utilize an industry-wide 
standard did not need any detailed regulations, indicated its approval 
of the Department's recognition that an employer cannot use the least 
common denominator within its industry, but must instead use methods 
that are normal, common, or prevailing in the industry. Intel (although 
stating that it is not a dependent employer itself) commended the 
Department for listing many of the recruitment methods used in the 
information technology industry today, but suggested changing the terms 
from ``active'' and ``passive'' to ``on-going'' recruitment and 
``targeted'' recruitment to better describe recruitment practices. 
Similarly, ACIP commented that employers commonly undertake both ``on-
going'' and ``targeted'' recruitment.
    The Department continues to be of the view that some guidance is 
appropriate to assist employers in determining industry-wide standards. 
The Department sees no merit in the suggestion that an employer should 
be able to use any legitimate process utilized by employers in the 
industry. The statute requires that an industry-wide standard be 
utilized. There likely will be considerable variance among the methods 
used by different employers within the same industry. An employer who 
selects a method that falls short of the standard will not satisfy the 
statutory requirement. Such an interpretation of the statute (allowing 
use of any single practice used within its industry, even if it is the 
least common denominator, to pass muster) would allow an employer's 
recruiting practice to be self-validating, thereby frustrating 
statutory intent as well as its plain meaning.
    The Department therefore has decided to go forward with its 
proposal to list the most common recruiting methods, and stating its 
expectation that good faith recruitment ordinarily will involve several 
of these methods, both passive and active. In this connection, the 
Department finds helpful the distinction between ongoing recruitment 
efforts to find candidates for ``generic'' positions always in short 
supply as contrasted with its targeted recruitment for a particular 
opening. However, the Department believes the active/passive 
distinction is a different standard and is more useful in guiding an 
employer's compliance with its recruitment obligations. The Department 
continues to believe that ``industry-wide standards'' cannot reflect 
the lowest common denominator. Rather, they must include methods that 
are normal, common or prevailing in the industry--defined as those 
employers competing for the same potential workers--including the 
methods which have been most effective at recruiting U.S. workers.
    In view of the comments regarding the Department's proposed 
presumption, however, the Interim Final Rule does not include any 
presumptive level of recruitment that constitutes good faith 
recruitment. Employers will be expected to demonstrate in the event of 
an investigation, that their recruitment was consistent with industry-
wide standards.
    The rule requires that employers at a minimum recruit both 
internally--among their own work force and workers whose employment 
recently terminated because of expiration of a contract or grant--and 
externally--among U.S. workers elsewhere in the economy. The Department 
believes that such practices are the norm in all industries. 
Furthermore, given employers' testimony at Congressional hearings 
regarding widespread shortages of workers, the Department is confident 
that active recruitment is also the norm, and the rule will require 
some active recruitment (either internally, such as by training other 
employees, or externally). Employers are cautioned that 
disproportionate recruitment

[[Page 80156]]

through some sources, such as college campuses, can have the unintended 
effect of discriminating against older workers. The Department also 
encourages employers to recruit among underrepresented populations 
(e.g., minorities, persons with disabilities) and in rural areas.
    Several comments were received regarding the particular methods of 
solicitation utilized by employers. Intel, among other commenters, 
noted a dramatic shift away from the use of traditional methods such as 
print advertisements to other methods such as electronic media and 
specialized contacts. The IEEE, while agreeing with the Department's 
approach, encouraged the Department to consider imposing a requirement 
that employers make greater utilization of Intranet and Internet 
publication of job openings. Others (AFL-CIO, Malyanker) expressed the 
view that the utility of the Internet is overstated. Another commenter 
(Satyam) noted that the use of the Internet for recruitment is common, 
but stated that its review of the NPRM left it with the impression that 
it is disfavored by DOL.
    The Department did not intend to leave the impression that it does 
not favor the Internet. As the NPRM recognizes, recruitment within the 
industries for which H-1B workers are sought--especially the 
information technology industry--often involves the use of electronic 
media. The Department encourages the use of this method in industries 
where it has proven effective and where it has the potential to attract 
the widest relevant audience. The Department notes that this method has 
shown itself to be inexpensive and expeditious (and in the case of 
services such as America's Job Bank, this method is free and accessible 
by any personal computer with an Internet connection). At the same 
time, as some commenters have noted, the effectiveness of electronic 
advertising is sometimes overrated and, in any event, it is not a 
substitute for active methods of recruitment, which can be better 
targeted to U.S. workers who are qualified for a particular position.
    AILA and Rapidigm contend that the Department's proposal is more 
stringent than the reduction-in-recruitment (RIR) guidelines 
established under GAL 1-97 (Oct. 1, 1996) (recently published for 
comment at 64 FR 23984 (May 4, 1999)) for the permanent program for 
occupations in which there is little or no availability.
    The Department notes that the ACWIA establishes a specific 
recruitment requirement that employers recruit in accordance with 
industry-wide standards. Furthermore, unlike the H-1B program, the 
recruitment efforts and accompanying documentation of industry practice 
for each RIR application under the permanent program are reviewed by 
the State agency and ETA Regional Office, which base their 
determinations on local labor market conditions. Because under the H-1B 
program recruitment efforts by H-1B-dependent employers and willful 
violators will be reviewed only in the event of an investigation, the 
Department believes that an explication of the industry-wide 
requirement is appropriate in these rules.
    It should be noted, however, that the Department has not suggested 
that an employer is required to undertake separate recruitment efforts 
for every position listed on the LCA. In a particular situation, an 
employer may reasonably decide to solicit for all similar positions 
listed on an LCA(s) at the same time, particularly where the employer 
plans to hire for the positions at or about the same time. Similarly, 
as commenters pointed out, employers which regularly experience large 
numbers of vacancies may undertake ongoing recruitment. The Department 
will not second-guess an employer's good faith, reasonable decision in 
such circumstances, provided it accords with the relevant ``industry-
wide standards'' applicable to the employer.
    Finally, with regard to the comments by numerous individuals, the 
Department believes there is no statutory support for measuring an 
employer's recruitment efforts by the amount of money expended by the 
employer. Accordingly, the Department is not persuaded that there is 
merit to the suggestion that an employer must make a threshold showing 
that it has incurred solicitation expenses at or above some prescribed 
amount.
2. What Constitute ``Good Faith Steps'' in Recruitment? 
(Sec. 655.739(h))
    In the NPRM, the Department expressed the view that good faith 
recruitment requires employers to ``maintain a fair and level playing 
field for all applicants,'' and to ``be able to show that they have not 
skewed their recruitment process against U.S. workers.'' The Department 
stated its belief that the ``good faith'' recruitment obligation 
encompasses the pre-selection treatment of the applicants, not merely 
the steps taken by an employer to communicate job openings and solicit 
applicants. The Department indicated that, where an employer's 
recruitment efforts have been demonstrably unsuccessful, it would 
examine closely the entire recruitment process. This examination would 
include the pre-selection treatment of applicants, ``to insure that 
U.S. workers are given a fair chance for consideration for a job, 
rather than being ignored or rejected through some tailored screening 
process based on an employer's preferences or prejudices with respect 
to the makeup of its workforce.'' The NPRM proposed that an employer 
would not meet its good faith recruitment obligation if, for example, 
it only interviewed H-1B applicants or used different staff to screen 
or interview the H-1B applicants than the staff used for U.S. workers. 
The NPRM also stated that the Department would not second-guess work-
related screening criteria or the hiring decision regarding any 
particular applicant (the latter assigned by the ACWIA to the Attorney 
General). The Department did not propose any specific regimen or 
practice for the pre-selection treatment of applications and 
applicants. However, the Department considered whether to craft a 
presumption of good faith recruitment based on an employer's hiring of 
a significant number of U.S. workers and, thereby, accomplishing a 
significant reduction in the ratio of H-1B workers to U.S. workers in 
the employer's workforce. The Department indicated that it would refer 
any potential violation of U.S. employment laws to the appropriate 
enforcement agency.
    As stated by Representative Smith:

    ``Any `good faith' recruitment effort, as required by this 
legislation, must include fair, adequate and equal consideration of 
all American applicants. The Act requires that the job must be 
offered to any American applicant equally or better qualified than a 
nonimmigrant. Congress recognizes that `good faith' recruitment does 
not end upon receipt of applications, but rather must include the 
treatment of the applicants. In evaluating this treatment, the 
Department should consider the process and criteria for screening 
applicants, as well as the steps taken to recruit for the position 
and obtain those applicants. . . . Employers who consistently fail 
to find American workers to fill positions should receive the 
Department's special attention in this context of `good faith' 
recruitment.''

144 Cong. Rec. E2324, 2325 (Nov. 12, 1998). Regarding the interface 
with the Attorney General's enforcement of the ``failure to select'' 
requirement, Congressman Smith stated:

    ``[The Act] also contains a savings clause that states that the 
provision should not be construed to affect the authority of the 
Secretary or the Attorney General with respect to `any other 
violations.' This savings clause means that while the Secretary is 
not authorized to remedy a violation of (1)(G)(i)(II) regarding an 
individual American

[[Page 80157]]

worker, the Secretary retains the broad authority to investigate and 
take appropriate steps regarding the employer's `good faith' 
recruitment efforts, including `good faith' consideration of 
American applicants.

144 Cong. Rec. E2325 (Nov. 12, 1998).
    Senator Abraham cautioned:

    ``[The Act] does not contemplate, for example, recharacterizing 
a `failure to select' complaint as a `failure to recruit in good 
faith' and then using the enforcement regime for the latter category 
of violations to pursue what in fact is a `failure to select' 
complaint.''

144 Cong. Rec. S12754 (Oct. 21, 1998).
    The Department received generally supportive comments from AOTA, 
APTA, IEEE, and the AFL-CIO. The AFL-CIO stated that the proposal 
represents ``a very important step in protecting the rights of U.S. job 
applicants by clearly stating that `good faith steps' in recruiting 
also include fair pre-selection treatment of job applicants.'' It also 
stated that the Department's approach does not intrude upon the 
Department of Justice's duty to arbitrate wrongful selection cases 
because the proposal deals only with pre-selection treatment that 
necessarily precedes a selection decision. IEEE stated its agreement 
with the Department that employers are required to maintain a fair and 
level playing field for all job applicants, and that employers must be 
able to show that their recruitment and selection processes have not 
been skewed so as to disadvantage U.S. workers.
    Several commenters opposed parts of the proposal. AILA and ACIP 
stated their view that the proposal violated the ACWIA's clear mandate 
that the Department not interfere with the enforcement of the 
``selection'' aspects of an employer's recruitment practice. AILA 
observed that the statute specifically sets up a separate remedial 
mechanism for alleged violations of the ``selection'' portion of the 
recruitment attestation, while including a savings clause that states 
that this provision does not restrict either the Department's or the 
Attorney General's enforcement authorities with respect to other 
violations.
    Several commenters opposed the proposed presumption based on an 
employer's success in hiring U.S. workers. The AFL-CIO stated that 
employer hiring of an arbitrary number of U.S. workers in no way 
establishes that an employer did not discriminate against others. 
Senators Abraham and Graham recognized that scrutiny of an employer's 
recruitment process may be proper in an investigation, but opposed the 
proposed presumption. Senators Abraham and Graham and AILA urged the 
Department to remember that the premise of the legislation was that at 
least in some cases recruitment had been demonstrably unsuccessful. 
ACIP, TCS, BRI and SBSC objected to the proposal that successful 
recruitment would be equated with good faith recruitment. Some 
commenters noted that the positions sought by LCAs often may be filled 
only from a small labor pool and that the filing of the LCA reflects 
the relative scarcity of U.S. workers for the job(s) involved.
    After review of the comments, the Department no longer believes 
that it would be useful to create a presumption that an employer has 
met its recruitment obligation by demonstrating its ``success'' in 
recruiting U.S. workers. Apparently, there is a strong concern that a 
negative presumption will arise that any dependent employer who is 
unable to demonstrate success--a situation which the commenters believe 
to be commonplace--will be presumed not to have acted in good faith. 
This was not the Department's intention. The Department, however, 
believes that this misperception may persist and could divert the focus 
away from the statutory test--an employer's adherence to industry-wide 
standards in meetings its recruitment obligations. For this reason, the 
Department's Interim Final Rule does not establish ``successful 
recruitment'' as a basis for a presumption of compliance. However, in 
its enforcement, the Department intends to look particularly carefully 
at the recruitment practices of employers who have not had success in 
hiring U.S. workers.
    In the Department's view, its proposal is faithful to the statute's 
provision charging the Attorney General, not the Secretary, with 
overseeing the mechanism designed to resolve a particular U.S. worker's 
allegations that the dependent employer failed to offer him a position 
for which an H-1B worker was sought. The NPRM explicitly recognizes the 
concern that the Department should not supplant the specific statutory 
mechanism by which a U.S. worker can adjudicate his or her complaint 
that an H-1B worker was unlawfully hired for a position for which the 
U.S. worker was qualified and should have been hired pursuant to 
Section 212(n)(1)(G)(i)(II) of the ACWIA. However, at the same time, 
the Department believes that an employer cannot engage in good faith 
recruitment if it does not give good faith consideration to U.S. 
applicants. The Department believes it entirely appropriate to consider 
the process and methods by which an employer screens applicants for a 
position in order to ensure that U.S. workers receive the protections 
accorded them under the ACWIA. As noted in the NPRM, the Department has 
no intention of second-guessing work-related screening criteria used by 
an employer or intruding upon the role provided for the Attorney 
General with respect to any hiring decision involving a particular 
applicant.
    Nothing in the Department's proposal suggested that the Department 
was interpreting the ACWIA in a way that would require a departure from 
the way in which employers customarily recruit workers for positions 
with their companies. The Department recognizes, as Senator Abraham 
also observed, that a multitude of legitimate factors, objective and 
subjective, go into recruiting and hiring decisions. As discussed in 
greater detail in the following section of the Preamble, the 
Department's inquiry will be limited to ensuring that an employer's 
recruitment efforts meet the statutory standard, i.e., that they are 
based on ``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.'' See Section 
212(n)(1)(G)(ii).
    Finally, Senators Abraham and Graham and the Congressional 
commenters stated that there may be legitimate business reasons for a 
company to use different personnel to interview H-1B applicants than 
U.S. workers, such as where the employer lacks personnel who speak the 
language of an applicant, or where the company recruits specialists 
from other countries who are familiar with the foreign culture.
    The Department agrees that there may be circumstances in which 
using different staff to interview U.S. and H-1B workers may be 
appropriate. In these situations, however, it is important, in the 
Department's view, that the personnel who interview the H-1B applicants 
not have a more effective say in the recruitment/hiring process than 
the personnel interviewing U.S. applicants. A U.S. worker's ability to 
compete for the position covered by the LCA should not be adversely 
affected by the status of the interviewer within the company or its 
recruitment/selection process. Furthermore, it is important that U.S. 
workers not be interviewed by employees or agents who have a financial 
interest in hiring H-1B nonimmigrants rather than U.S. workers.

[[Page 80158]]

3 & 4. How are ``Legitimate Selection Criteria Relevant to the Job that 
are Normal or Customary to the Type of Job Involved'' to be Identified 
and Documented? What Actions Would Constitute a Prohibited 
``Discriminatory Manner'' of Recruitment? (Sec. 655.739(f) and (g))
    Section 212(n)(1) of the INA as amended by the ACWIA provides that 
``nothing in subparagraph (G) [of Section 212(n)(1), which establishes 
the dependent employer's recruitment obligation] shall be construed to 
prohibit an employer from using 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.''
    In explaining this provision, Senator Abraham stated:

    ``The purpose of this language is to make clear that an employer 
may use ordinary selection criteria in evaluating the relative 
qualifications of an H-1B worker and a U.S. worker. It is intended 
to emphasize that the obligation to hire a U.S. worker who is 
`equally or better qualified' is not intended to substitute someone 
else's judgment for the employer's regarding the employer's hiring 
needs. * * *. Moreover, its judgment as to what qualifications are 
relevant to a particular job is entitled to very significant 
deference. * * *. It is not intended to allow an employer to impose 
spurious hiring criteria with the intent of discriminating against 
U.S. applicants in favor of H-1Bs and thereby subvert employer 
obligations to hire an equally or better qualified U.S. worker.''

144 Cong. Rec. S12750 (Oct. 21, 1998).
    Congressman Smith explained:

    ``The employer's recruitment and selection criteria therefore 
must be relevant to the job (not merely preferred by the employer), 
must be normal and customary (in the relevant industry) for that 
type of job, and must be applied in a non-discriminatory manner. 
Just because an employer in good faith believes that its selection 
criteria meet such standards does not necessarily mean that they in 
fact do. Any criteria that would, in itself, violate U.S. law can 
clearly not be applied, including criteria based on race, sex, age, 
or national origin. The employer cannot impose spurious hiring 
criteria that discriminate against American applicants in favor of 
H-1Bs, thereby subverting employer obligations to hire an equally or 
better qualified American worker.''

144 Cong. Rec. E2324 (Nov. 12, 1998).
    In the NPRM, at Section E.3., the Department noted that employers 
are authorized to apply criteria that are legitimate (excluding any 
criterion which itself would be violative of any applicable law); 
relevant to the job; and normal or customary to the type of job 
involved--rather than the preferences of a particular employer.
    The Department suggested the North American Industrial 
Classification System as one means of showing a match between the 
employer's criteria and the accepted practices for a job. In essence, 
the Department stated that employers cannot impose spurious criteria 
that discriminate against U.S. workers in favor of H-1B workers. The 
Department also proposed that in evaluating an employer's ``good 
faith'' in the pre-selection treatment of applicants it would limit its 
scrutiny of screening criteria to these factors. The Department 
proposed to issue a rule encapsulating the requirement that an employer 
conduct its recruitment ``on a fair and level playing field for all 
applicants without skewing the recruitment process against U.S. 
workers.'' The Department proposed that the rule would apprize 
employers that hiring criteria proscribed by applicable discrimination 
laws cannot be used in solicitation or screening processes, nor may 
employers apply such processes in a disparate manner.
    As earlier noted, the Department's overall recruitment proposals 
generally received the support of the AFL-CIO, APTA, AOTA, and IEEE. 
Additionally, Intel specifically endorsed this aspect of the 
Department's proposal, stating: ``Legitimate selection criteria should 
be based on the `core' requirements to the position [involved], which 
varies by position and the specific project.'' Intel continued: ``We 
agree with [the Department] that the selection criteria be legitimate, 
relevant to the job, and be normal and customary to the type of job 
involved.''
    A general theme in many comments was that the Department should not 
define legitimate hiring criteria in advance, but rather should make 
determinations only in the context of individual enforcement cases.
    AILA expressed the view that the statute does not intend the 
``legitimate selection criteria'' provision as an affirmative 
requirement for employers, but rather as a savings clause where the 
Department or the Attorney General, in enforcement, believes that the 
employer's enforcement criteria were not ``legitimate'' or 
``relevant,'' or were applied in a discriminatory manner. AILA further 
stated its view that the Department's entire proposal with regard to 
selection criteria is beyond its statutory authority. ACIP expressed 
its concern about the Department's reference to the NAICS, which it 
stated was unnecessary micromanagement and would be difficult for 
employers to use since it is not yet available to employers. Latour and 
Kirkpatrick & Lockhart commented that subjective factors cannot be 
removed from the hiring process, including considerations such as 
personality, attitude, and other intangible issues.
    Miano, on the other hand, stated that it is important that H-1B 
nonimmigrants meet all the qualifications posted in the recruiting 
notices. In an apparent reference to employer recruitment prior to 
petitioning for immigrant workers under the permanent program, Miano 
observed that employers often advertise with more requirements than 
anyone can meet and then lower the requirements to bring in the foreign 
worker.
    The Department has no intention of specifying which hiring criteria 
are legitimate and which are not. The Department's Interim Final Rule, 
like the proposal, simply makes plain that the statutory obligation of 
dependent employers and willful violators is to base their recruitment 
and selection decisions on criteria that are legitimate, relevant, and 
normal to the type of job involved. Nor does the Department intend to 
undertake any elaborate scrutiny of selection criteria in its 
enforcement. The Department's review of the process, as the Interim 
Final Rule provides, is designed to ensure that U.S. workers are not 
subject to criteria that deny them a fair opportunity, as fashioned by 
the ACWIA, to compete for jobs for which nonimmigrant workers are being 
sought.
    The Department, however, has eliminated its reference to the North 
American Industrial Classification System as one means of showing a 
match between the employer's criteria and the accepted practices for a 
job. Upon review, the Department has determined that the online service 
``O*NET,'' an enhanced version of the Dictionary of Occupational 
Titles, and the U.S. Bureau of Labor Statistics, Occupational Outlook 
Handbook, will serve better than NAICS as a means by which an employer 
may choose to demonstrate the nexus between its recruitment/screening 
criteria and accepted practices for the job in question. As explained 
in IV.C.3 above (which addresses ``exempt workers'' under the ACWIA), 
both O*NET and the Occupational Outlook Handbook are readily available 
on the Internet. The Department wishes to stress, however, that both 
O*NET and the Handbook are being suggested only as tools to employers, 
and to the Department in its enforcement. Employers are not required to 
use these tools. Although these sources represent a statement by the 
Department of common qualifications for the occupations listed, they 
are not intended to be definitive

[[Page 80159]]

lists of all the criteria which the Department would find meet the 
statutory test in the event of an investigation.
    The Department also wishes to specifically caution against 
recruitment practices and selection criteria or practices which have 
the effect of discriminating against U.S. workers or other groups of 
workers, as the comment by Miano recognizes. In this connection, 
workers are advised that the three federal agencies ordinarily 
recognized as responsible for enforcement of anti-discrimination laws 
are the Equal Employment Opportunity Commission (EEOC), the Department 
of Justice's Office of Special Counsel (OSC), and the Department of 
Labor's Office of Federal Contract Compliance Programs (OFCCP). The 
EEOC administers several statutes prohibiting discrimination in 
employment based on factors such as age, race, color, religion, sex, or 
national origin. OFCCP administers several statutes and an executive 
order prohibiting discrimination by Federal government contractors and 
subcontractors based on factors such as race, color, religion, sex, 
national origin, disability, and veteran status. EEOC and OFCCP offices 
are located throughout the United States and can be located in the blue 
pages of the telephone directory. Complaints can be made to the EEOC by 
telephone at: (202) 275-7377; see also their website at www.eeoc.gov. 
Complaints can be made to OFCCP by telephone at: (202) 693-0102, -0106, 
or by contacting the local offices, which can be located at its 
website, www.dol.gov/dol/esa/public/contacts/ofccp/ofcpkeyp.htm.
    OSC administers several statutes concerning employment 
discrimination based on national origin, citizenship status, and 
immigration document abuse. OSC can be contacted at P.O. Box 27728, 
Washington, DC 20038-7728; telephone: 1-800-255-7688 (workers) or 1-
800-255-8155 (employers); and e-mail address: [email protected]; see 
also OSC's website at www.USDOJ.gov/crt/osc.
    TCS described its own hiring practices, which it contended should 
be allowed as legitimate under the Department's regulations. 
Specifically, TCS recruits its employees from university campuses 
(apparently in India) and places them in a 12-to 18-month training 
program in India. At the same time requiring a three-year commitment 
from its employees, whom it sends on assignments in India and 
throughout the world. TCS suggested that the Department's proposal 
could be read to require TCS instead to recruit U.S. workers for 
assignments in the United States without regard to the employment terms 
and conditions it applies to its other employees--a requirement which 
it suggested could potentially subject it to anti-discrimination 
claims. TCS argued that the Department's proposal incorrectly focused 
on the recruitment/employment for the particular job listed on an LCA 
rather than the dependent employer's hiring criteria for a position 
with the dependent employer--a position that encompasses duties and 
responsibilities beyond those required for the performance of the 
particular job covered by an LCA. TCS explained that its employees, 
including those it places in H-1B positions, serve as team members of 
consulting groups that will move from job to job in the United States 
and elsewhere. It stated that it hires employees with this enduring 
employment relationship in mind, not for the employee's particular 
assignment to a job in the United States.
    Similar practices are described by Simmons, which asked whether a 
foreign-based employer may give preference to its own (foreign) 
workers, who are familiar with the specific technologies and protocols 
of an ongoing project, and whether it would be required to offer 
permanent as distinguished from temporary positions to employees in the 
U.S., since it otherwise would only temporarily transfer its permanent, 
foreign workers to perform the job in the U.S. Simmons also commented 
that it provides extensive training to its employees in India, and 
asked if it could require that U.S. workers have such skills, or would 
it be required to use the hiring criteria it utilized to hire the 
workers in India. Finally, Simmons asked if it could require U.S. 
workers to have the precise, specialized skills to meet a specific 
customer need.
    In the Department's view, an employer's recruitment obligation 
attaches to the position for which an H-1B worker is sought in the 
United States (the employer is obliged to take, in the words of the 
statute, ``good faith steps to recruit . . . United States workers for 
the job for which the [H-1B worker(s)] is or are sought''). 
Additionally, the employer is required to offer the job to the U.S. 
worker if the worker is at least as qualified as the H-1B worker. 
Accordingly, the focus must be on the particular job(s) in the United 
States which is/are covered by the LCA, not the position an H-1B 
applicant already occupies or will occupy with the dependent employer. 
An employer will fail to meet its recruitment obligation if it utilizes 
recruitment/selection criteria that have the effect of precluding an 
equally or better qualified U.S. worker from being hired for the 
position. The Department also notes that L visas, where the criteria 
are met, may be available as an alternative method to accommodate 
intra-company transfers.
5. What Documentation Would Be Required of Employers? (Sec. 655.739(i))
    Concerning documentation to show that good faith recruitment was 
conducted in accordance with industry-wide standards, the NPRM stated 
that an employer would not need to retain actual copies of 
advertisements, provided it kept a record of the pertinent details. The 
Department proposed that an employer's public access file need only 
contain information summarizing the principal recruitment methods used 
in soliciting potential applicants and the time frame in which such 
recruitment was conducted. The NPRM also requested comments on how 
employers can and should determine industry-wide standards and how to 
make the employer's determination available for public disclosure.
    With regard to documentation concerning pre-selection treatment of 
applicants for employment, the Department proposed in the NPRM that 
employers should retain any documentation they receive or prepare 
concerning the consideration of applications by U.S. workers, such as 
copies of applications and/or related documents, test papers, rating 
forms, records regarding interview and job offers. The Department 
stated its view that the EEOC already requires employers to retain such 
records and therefore this requirement imposes no new obligations on 
employers.
    With regard to the proposed documentation requirement, Senator 
Abraham stated: ``The intent is not to require employers to retain 
extensive documentation in order to be able retroactively to justify 
recruitment and hiring decisions, provided that the employer can give 
an articulable reason for the decisions that it actually made.'' 144 
Cong. Rec. S12751 (Oct. 21, 1998).
    AILA and ACIP cited Senator Abraham's statement in the 
Congressional Record for the principle that the ACWIA did not impose 
any extensive documentation requirements. ACIP, however, stated its 
belief that prudent employers of their own volition may want to retain 
documentation and that it is appropriate for the Department to provide 
guidance on how long employers should retain such documentation.
    The Department disagrees with the view that the ACWIA denies the

[[Page 80160]]

Department the usual regulatory authority to require recordkeeping as a 
means of ensuring compliance with an employer's statutory obligations--
either generally or with specific reference to the recruitment 
obligation. The fact that the H-1B program is primarily complaint-
driven with only attestations of compliance filed initially with the 
Department makes it all the more important that documentation be 
retained so that the Department can determine compliance in the event 
of an investigation. In response to AILA's comment about the length of 
time which documents must be retained, the Department notes that its 
standard record retention requirements are set forth in Sec. 655.760(c) 
of the regulation, which has been clarified as discussed in IV.B.3, 
above.
    With regard to documents concerning recruitment practices, the AFL-
CIO and Miano urged that employers be required to retain copies of all 
job advertisements or other recruiting efforts. AILA asserted that the 
Department's statement that an employer need not keep copies of 
advertisements is an illusory saving because as a practical matter 
saving these documents is the only way to document the information the 
Department proposed to require. AILA recommended that employers only be 
required to keep a summary of their recruitment for the past six 
months, similar to the requirements of the RIR procedures in the 
permanent labor certification program--especially when an employer is 
still recruiting for open positions and it is its practice to hire U.S. 
as well as H-1B workers. However, AILA stated that employers should not 
be required to keep recruitment information in public access files 
because it invites competitor intrusion into an employer's recruitment 
practices.
    The Interim Final Rule, like the proposal, requires employers to 
retain documentation of the recruiting methods used, including the 
places and dates of the recruitment, advertisements, or postings; the 
content of the advertisements and postings; and the compensation terms 
(if not included in the content). The Department continues to believe 
that copies of print advertisements are not necessary since publication 
can be verified if necessary. Rather, the documentation may be in any 
form, such as a copy of an order or response from the publisher, an 
electronic or print record of an Internet notice, or a memorandum to 
the file. Similarly, the documentation of recruitment of positions 
filled by H-1B nonimmigrants need not be segregated from other records 
provided it is available to the Department upon request in the event of 
an investigation.
    In addition, as proposed, the employer will be required to maintain 
a summary of the recruitment methods used and time frames of 
recruitment in its public access file. The Department does not believe 
that information in this summary nature will unduly disclose 
proprietary information since advertisements and attendance at job 
fairs are public in any event.
    ACIP was the only commenter responding to the Department's request 
for comments on how employers should determine industry-wide 
recruitment standards, stating only that it is unaware of any source 
that catalogues standard recruiting practices within an industry. The 
Department repeats its request for further information on this point. 
The Department has determined that employers will not be required to 
maintain evidence of industry practice. However, in the event of an 
investigation, the employer will be required to substantiate its 
assertion as to industry practice through credible evidence, such as 
through trade organization surveys, studies by consultative groups, or 
a statement from a trade organization regarding the industry norm(s). 
The Department will look behind such evidence as it deems appropriate 
in the context of the particular recruitment performed by an employer.
    With regard to documentation concerning pre-selection treatment of 
applicants, AILA disagreed with the Department's characterization of 
EEOC guidelines, stating that EEOC only requires that if documentation 
is created or retained, it must be done consistently. It also stated 
that it is impractical to expect an employer to retain what may be 
thousands of resumes submitted to it at a job fair, especially since 
many resumes do not even relate to positions offered.
    As discussed in detail in IV.D.8, above, in connection with the 
retention of records relating to displacement of U.S. workers, the 
Department disagrees with AILA's characterization of the EEOC 
requirements. The Department continues to believe that most employers 
are already required to preserve copies of the records listed and that 
retention of the documents is necessary to demonstrate fair treatment 
of U.S. applicants. ADEA regulations, for example, require an employer 
to preserve all records it makes, obtains or uses relating to ``[j]ob 
applications, resumes, or any other form of employment inquiry whenever 
submitted to the employer in response to his advertisement or other 
notice of existing or anticipated job openings, including records 
pertaining to the failure or refusal to hire any individual, * * * 
[j]ob orders submitted by the employer to an employment agency or labor 
organization for recruitment of personnel for job openings, * * * [a]ny 
advertisements or notices to the public or to employees relating to job 
openings, promotions, training programs, or opportunities for overtime 
work.'' 29 CFR 1627.3(b)(i).
    The Department emphasizes that it is not requiring employers to 
create any documents regarding treatment of applicants for employment, 
but rather to preserve those documents which are created or received. 
With regard to the comment regarding job fairs, this rule would not 
require employers to retain any resumes which do not relate to the 
positions to be filled by H-1B nonimmigrants. Nor does the Interim 
Final Rule require that any information relating to treatment of 
applications be maintained in the public access file.

F. What Are the Requirements for Posting of Notice? (Combined With 
Section O.5 of the Preamble to the NPRM) (Sec. 655.734(a)(1)(ii)(A) and 
(B))

    Section 212(n)(1)(C) of the INA, 8 U.S.C. 1182(n)(1)(C), requires 
that, at the time of filing the LCA, an employer seeking to hire an H-
1B nonimmigrant shall notify the bargaining representative of its 
employees of the filing or, if there is no bargaining representative, 
post notice of filing in conspicuous locations at the place of 
employment. As amended by the ACWIA, Section 212(n)(1)(C) further 
provides (where there is no bargaining representative) that the notice 
may be accomplished ``by electronic notification to employees in the 
occupational classification for which the H-1B nonimmigrants are 
sought.''
1. What Are the Requirements for Posting of ``Hard Copy'' Notices at 
Worksite(s) Where H-1B Workers Are Placed? (NPRM Section O.5) 
(Sec. 655.734(a)(1)(ii)(A))
    Regulations with respect to this notification requirement were 
published by the Department as a Final Rule on December 20, 1994 (59 FR 
65646, 65647). That Final Rule (set forth in the current Code of 
Federal Regulations) required, among other things, that an employer, 
who sends an H-1B worker to a worksite within the area of intended 
employment listed on the LCA which was not contemplated at the time of 
filing the LCA, post a notice at the worksite on or before the date the 
H-1B nonimmigrant begins work. 20 CFR 655.734(a)(1)(ii)(D). The purpose 
of the

[[Page 80161]]

provision was to enable employers to place H-1B workers at worksites 
where posting had not occurred without filing a new LCA. This provision 
was among those enjoined for lack of notice and comment by the court in 
National Association of Manufacturers v. Reich (NAM), 1996 WL 420868 
(D.D.C. 1996). On October 31, 1995, during the pendency of the NAM 
litigation, the Department republished the regulation for comment (60 
FR 55339).
    In the 1999 NPRM, the Department proposed for comment 
Sec. 655.734(a)(1)(ii)(A) (previously published for notice and comment 
in the October 31, 1995 proposed rule as Sec. 655.734(a)(1)(ii)(C) and 
(D)). The provisions regarding ``hard copy'' notice requirements 
remained essentially unchanged from the 1995 proposed rule. Subclause 
(A)(3) requires employers to post notice at worksites on or within 30 
days before the date the LCA is filed. Subclause (A)(4) requires that 
where the employer places an H-1B nonimmigrant at a worksite which is 
not contemplated at the time of filing the LCA, but is within the area 
of intended employment listed on the LCA, the employer is to post 
notice at the worksite (either by hard copy or electronically) on or 
before the date any H-1B nonimmigrant begins work there. The preamble 
explained that posting is not required if the location is not a 
``worksite,'' as discussed in proposed Appendix B of the NPRM.
    Fourteen commenters responded to the 1995 proposed rule on 
notification. Eight of those commenters (AILA, ACIP, Intel, Microsoft, 
Motorola, NAM, Complete Business Solutions, Inc. (CBSI), and Moon, 
Moss, McGill & Bachelder (Moon)) objected to posting at worksites not 
controlled by the LCA-filing employer. These commenters asserted that 
many employers' customers would not allow posting at their worksites. 
In addition, because the regulations define ``place of employment'' as 
the worksite or physical location at which the H-1B nonimmigrant's work 
is actually performed, some commenters expressed a concern that strict 
application of this definition of place of employment could lead to 
absurd and/or unduly burdensome notice requirements such as posting 
notice at a restaurant when an H-1B nonimmigrant has a business lunch, 
at a courthouse when the nonimmigrant makes a court appearance, or at 
an out-of-town hotel when the nonimmigrant attends a training seminar. 
One commenter (Microsoft), expressed concern about the burden of 
notification and suggested that the notice provision should not apply 
to employers who do not make great use of the H-1B nonimmigrant worker 
visa program.
    The Department received six comments on these provisions in 
response to the 1999 NPRM.
    The AFL-CIO emphasized the importance of giving notice to all 
affected employees, including employees of the secondary employer and 
employees of other staffing firms. The AFL-CIO stated that the purpose 
of the notice is to provide information to affected workers that they 
may have certain rights and that the employer has certain duties 
regarding placement of the H-1B worker which are not diminished because 
the worksite is ``short-term'' or ``transitory.''
    Four employer organizations (ACIP, AILA, ITAA, NACCB) commented on 
the issue of notification (whether hard-copy or electronic) to affected 
workers at third-party worksites. These groups contended that the 
statute requires an employer to notify only its own employees and that 
it is unreasonable to hold a primary employer responsible for notifying 
employees at worksites over which it lacks control. AILA gave as an 
example, workers such as service engineers who travel to a number of 
worksites during the course of a day or a week. AILA stated that if a 
client refuses to post notice, an H-1B worker cannot be sent to the 
site, resulting in a potential loss of business.
    One commenter (Latour) requested that the regulation specify that 
worksite posting requirements do not apply to rehabilitation 
professionals providing home health care.
    The Department has carefully considered the comments submitted in 
response to the 1995 proposed rule and the 1999 NPRM. The Department 
notes first that the statute requires that notice be posted at the 
place of employment. See Section 212(n)(1)(C)(ii). The Department's 
regulations have consistently defined ``place of employment'' as ``the 
worksite or physical location where the work is performed.'' 20 CFR 
655.715 (1992).
    This definition was modified slightly in the 1994 Final Rule 
(currently in effect) to provide ``where the work actually is 
performed.''
    Furthermore, the purposes of notification can only be satisfied by 
notice to all of the affected workers--i.e., all of the workers in the 
occupation in which the H-1B worker is employed at the place of 
employment, including employees of a third-party employer. This is 
critical because of the real possibility of displacement by the H-1B 
employees. Although this would only be a violation if the employer is 
an H-1B-dependent employer or willful violator, there remains a real 
possibility that U.S. workers of other employers could be harmed by the 
placement of the H-1B worker. Thus the notice alerts affected employees 
to the fact that an LCA has been filed and that H-1B workers will be 
placed at the worksite. Without such notice affected workers would not 
be able to file complaints regarding H-1B violations either with regard 
to themselves (if they are displaced because of a placement by an H-1B-
dependent employer or willful violator), or with regard to the H-1B 
workers (which might indirectly affect themselves).
    The Department observes that a number of employers' concerns with 
respect to notification of affected employees, either by hard copy 
posting or electronically, at third-party work sites, have been 
addressed by the interpretation of ``place of employment''/''worksite'' 
discussed in detail in IV.P.1 and .2 of the preamble and Sec. 655.715 
of the Interim Final Rule (see Appendix B of the NPRM). As stated in 
Sec. 655.715, the Department interprets ``place of employment'' as 
excluding locations where the H-1B worker's presence either is due to 
the developmental nature of his/her activity (e.g., management seminar; 
formal training seminar), or is short-term (not exceeding five 
consecutive workdays for any one visit) and transitory due to the 
nature of his/her job (e.g., computer ``troubleshooter,'' sales 
representative, trial witness). Under this interpretation, employers 
would not be required to give notice in many of the situations about 
which concerns have been expressed, but would be required to give 
notice in those instances where the Act and its purposes require. If a 
location does not constitute a ``worksite,'' the employer is not 
required to post notice.
    Although the Department recognizes that in some instances it may be 
inconvenient for an employer to post notice at a worksite controlled by 
another business (such as the customer of an employer), the Department 
notes that its experience in enforcement is that no employer has been 
unable to post notices at a customer's worksite when the operator, 
owner, or controller of the worksite was informed that posting was 
required by the statute and the regulations.
    The Department agrees with the comment that notice need not be 
provided where a rehabilitation professional is providing services in 
the client's home. The Interim Final Rule provides in paragraph (2) of 
the definition of ``place of employment'' in Sec. 655.715, that ``a 
physical therapist

[[Page 80162]]

providing services to patients in their homes within an area of 
employment'' is an example of a non-worksite location; in these 
situations notice must be posted at the worker's home station or 
regular work location.
2. What is Required for ``Electronic Posting'' of Notice to Employees 
of the Employer's Intention to Employ H-1B Nonimmigrants? 
(Sec. 655.734(a)(1)(ii)(B))
    The Department also proposed a regulation, 
Sec. 655.734(a)(1)(ii)(B), which would implement the ACWIA provision 
allowing electronic notification of employees. The ACWIA modified the 
statutory requirement for worksite posting of notices (where there is 
no collective bargaining representative), to permit an H-1B employer to 
use electronic communication as an alternative to posting ``hard copy'' 
notices in conspicuous locations at the place of employment.
    Senator Abraham explained: ``An employer may either post a physical 
notice in the traditional manner, or may post or transmit the identical 
information electronically in the same manner as it posts or transmits 
other company notices to employees. Therefore, use of electronic 
posting by employers should not be restricted by regulation.'' 144 
Cong. Rec. S12751 (Oct. 21, 1998).
    Congressman Smith elaborated: ``By providing this flexibility, 
Congress intended to improve the effectiveness of posting in the 
protection of American workers. Therefore, the electronic notification 
must actually be transmitted to the employees, not merely be made 
available through electronic means such as inclusion on an electronic 
bulletin board.'' 144 Cong. Rec. E2325 (Nov. 12, 1998).
    As the NPRM explained, in providing this alternative method for 
notification to affected workers, Congress indicated no intention of 
reducing the effectiveness of the notice requirement which has been an 
element of the H-1B program from its inception. The proposed regulation 
therefore provided that electronic notice may be accomplished by any 
means the employer ordinarily uses to communicate with is workers about 
job vacancies or promotion opportunities. Thus the NPRM stated that 
notice would be permitted through the employer's ``home page'' or 
``electronic bulletin board'' where employees as a practical matter 
have direct access; or through e-mail or other actively circulated 
electronic message such as the employer's newsletter, provided the 
employees have computer access readily available. Where such computer 
access is not readily available, the NPRM explained that notice may be 
accomplished by posting a ``hard copy'' at the worksite.
    The preamble further explained at Section O.5 that where the H-1B 
nonimmigrant(s) will be employed at the worksite of another employer, 
the H-1B employer is required to provide notice to the affected workers 
at that worksite. Thus, the H-1B employer may make arrangements with 
the other employer to accomplish the notice (e.g., the other employer 
may ``post'' the electronic notice on its Intranet or employee 
newsletter, or may ``post'' hard copy notice in conspicuous locations 
at the place of employment).
    The Department received 30 comments, including 22 from individuals, 
on the 1999 NPRM provisions regarding electronic notice.
    The individuals generally objected to the statutory provision 
allowing electronic posting as an alternative to hard copy posting, 
asserting that Internet posting alone allows companies to hide 
replacement of American workers with foreign workers. The AEA 
essentially expressed a similar view on electronic posting, noting that 
the Internet/Intranet method of notification is unworkable.
    The AFL-CIO commented that electronic posting should only be 
allowed if employers can show that all workers have access to e-mail or 
the Internet site, and that all notices are flagged to them. Another 
employee organization, IEEE, emphasized that to be an effective notice, 
electronic communications must be readily available and accessible to 
all affected U.S. and foreign workers.
    ACE, ACIP and SHRM commended the Department for its flexibility on 
methods of electronic posting. ACIP recommended that the Department 
distinguish between ``indirect'' and ``direct'' electronic notices, 
suggesting that where ``indirect'' notice is given, such as on a 
bulletin board, the employer should have to make the notice available 
for 10 days. If, however, the employer provides direct notice, such as 
e-mail to each employee, ACIP suggested that notice should only have to 
be sent to each affected employee once. SHRM urged the Department to 
allow an employer to document that notice has been given by permitting 
the employer to place a signed notice in the public access file 
regarding how notice was provided. AILA recommended amending the 
regulations to clarify that an employer may satisfy its electronic 
posting obligation by providing the notification on its internal 
network or website. AILA also recommended that with respect to 
employers which send the notice by e-mail, the regulation should 
specify that notification sent to a distribution group of ``affected 
workers'' satisfies the electronic posting requirement. Another 
commenter (Cooley Godward) sought clarification on the issue of how 
electronic posting can comply with the requirement of 
Sec. 655.734(a)(1)(ii)(A) that the LCA be posted in two or more 
conspicuous places, and on whether or not all four pages of the LCA 
must be posted.
    With regard to posting at third-party worksites, AILA suggested 
that a primary employer should be able to satisfy its obligation to 
document that an electronic posting was made at the work site of a 
third-party employer in any one of the following three ways: (1) A 
statement in the contract between the parties requiring the 
notification to be made; (2) a written statement by a responsible party 
at the third-party location; or (3) a printout of the electronic 
communication with a certification about when, how, and to whom it was 
sent.
    The statute does not give the Department the discretion to disallow 
electronic posting, as suggested by the individual commenters. The 
Department agrees with the AFL-CIO and the IEEE, however, that the 
critical consideration is that the notice is readily available and 
accessible to the affected workers. The Department believes that the 
proposed regulation, as drafted, meets these concerns. Posting must be 
by the means the employer ordinarily uses to communicate with its 
workers about job vacancies or promotion opportunities. Posting on the 
employer's ``home page'' or electronic bulletin board is allowed where 
employees as a practical matter have direct access to these resources. 
Where employees lack computer access, a hard copy must be posted or the 
employer may provide employees individual copies of the notice.
    The Interim Final Rule clarifies the operational requirements for 
electronic posting. Like the physical posting, the electronic notice 
need not incorporate a copy of the LCA, although it would be 
permissible since a copy of the LCA would satisfy the substantive 
requirements (see Sec. 655.734(a)(1)(ii)). (Employers are reminded that 
all H-1B nonimmigrants must be given a copy of the LCA. See 
Sec. 655.734(a)(2).) Like ``hard copy'' posting, electronic posting on 
a ``home page'' or electronic bulletin board must be posted for 10 
days. If direct notice is given to each affected employee, as through 
e-mail or ``hard copy'' notices, the notice need only be given once 
during the regulatory time

[[Page 80163]]

period. Notice by e-mail may be provided by notification to an e-mail 
group consisting of all of the affected employees. Electronic posting, 
unlike hard copy posting, need not be posted in two locations, provided 
all the affected employees, as a practical matter, have access to the 
website or bulletin board. Another method of posting would have to be 
used to reach those employees who do not have such access. For example, 
home care therapists may not have practical access to a computer at all 
as a part of their job. Where there is no such access, physical posting 
at two sites in the home office or individual copies of the notice 
would be necessary. The Department believes the existing documentation 
provision is broad enough to encompass electronic posting, both at the 
employer's own worksite and at another employer's worksite.
    The Interim Final Rule also clarifies that electronic notification, 
like other physical posting, shall be provided in the period on or 
before 30 days before the date the LCA is filed. Where H-1B 
nonimmigrants are placed at a worksite not contemplated when the LCA 
was filed, the notification shall be provided on or before the date the 
H-1B nonimmigrant begins work at the site.
    Finally, upon review of the provisions of the ACWIA, the Department 
has concluded that some modification of the required notice is 
appropriate. Specifically, the Department has concluded that the 
content of the notice should be modified to require dependent employers 
and willful violators to notify affected workers, through the methods 
provided herein, that they are H-1B-dependent or a willful violator, 
subject to the requirements for recruitment and non-displacement of 
U.S. workers. Where the employer is dependent (or a willful violator) 
but will employ only exempt workers, the notice must so provide, and 
further state that it is not subject to the recruitment and non-
displacement requirements. In addition, the notice about filing 
complaints with the Department of Justice for failure to offer 
employment to an equally or better qualified U.S. worker will only be 
required for H-1B-dependent employers and willful violators. Finally, 
because the full attestations are set forth in the cover sheet, Form 
ETA 9035CP, the provision in Sec. 655.734(a)(3) requiring employers to 
give copies of the LCA to all H-1B nonimmigrants has been modified to 
provide that copies of the cover sheet shall be given to the H-1B 
nonimmigrant upon request.

G. What Does the ACWIA Require of Employers Regarding Benefits to H-1B 
Nonimmigrants? (Sec. 655.731(c)(3), Sec. 655.732)

    Section 212(n)(2)(C)(viii) of the INA as amended by the ACWIA 
states that ``[i]t is a failure to meet a condition of paragraph 1(A) 
[the wage and working condition attestation requirements] * * * to fail 
to offer an H-1B nonimmigrant, during the nonimmigrant's period of 
authorized employment, benefits and eligibility for benefits (including 
the opportunity to participate in health, life, disability, and other 
insurance plans; the opportunity to participate in retirement and 
savings plans; and cash bonuses and noncash compensation such as stock 
options (whether or not based on performance) on the same basis, and in 
accordance with the same criteria, as the employer offers to United 
States workers.''
    Senator Abraham and Congressman Smith described the operation of 
this provision in similar terms. Senator Abraham explained:

    This obligation is only an obligation to make benefits available 
to an H-1B worker if an employer would make those benefits available 
to the H-1B worker if he or she were a U.S. worker. Thus, if an 
employer offers benefits to U.S. workers who hold certain positions, 
it must offer those same benefits to H-1B workers who hold those 
positions. Conversely, if an employer does not offer a particular 
benefit to U.S. workers who hold certain positions, it is not 
obligated to offer that benefit to an H-1B worker. Similarly, if an 
employer offers performance-based bonuses to certain categories of 
U.S. workers, it must give H-1B workers in the same categories the 
same opportunity to earn such a bonus, although it does not have to 
give the H-1B worker the actual bonus if the H-1B worker does not 
earn it.

144 Cong. Rec. S12753 (Oct. 21, 1998). See also the statement of 
Congressman Smith, 144 Cong. Rec. E2326.
    Senator Abraham continued:

    While this clause is not intended to require that H-1B workers 
be given access to more or better benefits than a U.S. worker who 
would be hired for the same position, it does not forbid an employer 
from doing so. For example, an employer might conclude that it will 
pay foreign relocation expenses for an H-1B worker whereas it will 
not pay such relocation expenses for a U.S. worker.

144 Cong. Rec. S12753 (Oct. 21, 1998).
    Congressman Smith, on the other hand, stated that ``[t]he statement 
`on the same basis' is intended to mean equal or equivalent treatment, 
not preferential treatment for any group of workers. Thus, if an 
employer offers benefits to American workers, it must offer those same 
benefits to H-1B workers.'' 144 Cong. Rec. E2326 (Nov. 12, 1998).
    Senator Abraham also explained that ``care must be taken to find 
the right U.S. worker to whom to compare the H-1B worker in terms of 
access to benefits. *  *  * If a particular benefit is available only 
to an employer's professional staff, then it only need be made 
available to an H-1B filling a professional staff position. If an 
employer's practice is not to offer benefits to part-time or temporary 
U.S. workers, then it is not required to offer benefits to part-time H-
1B workers or temporary H-1B workers employed for similar periods.'' 
144 Cong. Rec. S12753 (Oct. 21, 1998).
    Senator Abraham and Congressman Smith differed in their view as to 
the application of the provision to multinational corporations. Thus 
Senator Abraham stated:

    If an employer's practice is to have its U.S. workers brought in 
on temporary assignment from a foreign affiliate of the employer 
remain on the foreign affiliate's benefits plan, then it must allow 
its H-1B workers brought in on similar assignments to do the same. 
Likewise, in that instance, it need not provide the H-1B workers 
with the benefits package it offers to its U.S. workers based in the 
U.S. Indeed, even if it does not have any U.S. workers stationed 
abroad whom it has brought in this fashion, it should be allowed to 
keep the H-1B worker on its foreign payroll and have that employee 
continue to receive the benefits package that other workers 
stationed at its foreign office receive in order to allow the H-1B 
worker to maintain continuity of benefits. In that instance, the 
basis on which the worker is being disqualified from receiving U.S. 
benefits (that he or she is receiving a different benefits package 
from a foreign affiliate) is one that, if there were any U.S. 
workers who were similarly situated, would be applied in the same 
way to those workers. Hence the H-1B worker is being treated as 
eligible for benefits on the same basis and according to the same 
criteria as U.S. workers. It is just that the criterion that 
disqualifies him or her happens not to disqualify any U.S. workers. 
Or to put the point a little differently: The H-1B worker is being 
given different benefits from the U.S. workers not because of the 
worker's status as an H-1B worker but because of his or her status 
as a permanent employee of a foreign affiliate with a different 
benefits package.

Ibid.
    Congressman Smith had a different perspective:

    There is particular concern regarding such erosion in instances 
where a foreign affiliate of a petitioning employer is involved as 
the agent for payment of wages and provision of benefits to the H-1B 
workers. The statutory obligations must be fully met in such 
instances. Congress intends that the ultimate and complete 
responsibility for all employer obligations under this Act, 
including the provision of benefits to the H-1B worker equal to 
those offered the employer's

[[Page 80164]]

American workers based in the U.S., lies with the American (United 
States) employer who brings nonimmigrant workers into the country. 
Ultimately, it is the American employer, not the foreign subsidiary, 
pledging a benefit package similar to that of its American workers. 
Congress would expect the Secretary to look with particular care at 
circumstances involving a foreign subsidiary where there is an 
appearance of contrivance to avoid the obligation to provide equal 
wages and benefits to H-1B and American workers.

144 Cong. Rec. E2326 (Nov. 12, 1998).
1. What Does ``Same Basis and Same Criteria'' Mean With Respect to an 
Employer's Treatment of U.S. Workers and H-1B Workers With Regard to 
Benefits? (Sec. 655.731(c)(3), Sec. 655.732)
    In the NPRM, the Department proposed that: (a) An employer is 
required to offer H-1B workers the same benefit package it offers to 
U.S. workers; (b) the package must be offered on the same basis as it 
is offered to U.S. workers, i.e., the employer may not impose more 
stringent eligibility or participation requirements on the H-1B workers 
than those applied to U.S. workers; (c) the comparison between the 
benefits offered U.S. and H-1B workers should be between similarly 
employed workers, i.e., those in the same employment categories, such 
as full-time compared to full-time, professional to professional; and 
(d) the benefits actually provided to the H-1B workers, as 
distinguished from the benefits offered, might be different than those 
provided to U.S. workers because of an individual's choice among 
options. The Department also sought comments regarding whether the 
ACWIA would allow an employer to provide a different, but ``equivalent 
package'' to satisfy its benefits obligation, noting the difficulty of 
making an evaluation of the benefits--particularly a qualitative 
evaluation of the benefits, as distinguished from one based on the 
relative costs to the employer of providing such benefits.
    The Department further proposed that an employer, consistent with 
its attestation to adhere to minimum standards for H-1B workers, may 
provide greater benefits to H-1B workers than to U.S. workers. The 
Department acknowledged, however, that the phrases ``same basis'' and 
``same criteria,'' applied literally, could require that U.S. and H-1B 
workers be offered the same (or possibly equivalent) benefits.
    The Department noted the possible complications that might arise 
with respect to benefits afforded employees of a multinational 
corporate operation, particularly where the H-1B worker works in the 
U.S. for only a short period of time. In this situation, the NPRM 
noted, it might not be practical for the U.S. employer to provide the 
H-1B worker with benefits identical to those provided its U.S. workers. 
The Department proposed that while the U.S. employer may cooperate with 
its corporate affiliate in the worker's home country with regard to the 
payment of wages to the worker and the maintenance of his or her ``home 
country'' benefits (such as that country's retirement system), the U.S. 
employer remains ultimately responsible for ensuring that the H-1B 
worker is provided benefits at least equal to those offered U.S. 
workers. The Department stated that it would look closely into 
situations involving a foreign affiliate where there was the appearance 
of a contrived arrangement to avoid the U.S. employer's obligation to 
provide to its H-1B workers wages and benefits at least equal to those 
provided its U.S. workers. At the same time, the Department proposed 
that it would carefully examine the circumstances to consider non-
equivalent but nonetheless equitable benefits, including the H-1B 
worker's actual length of stay in the United States.
    The Department also proposed to modify Sec. 655.732 of the current 
regulations to clarify that an employer must provide the H-B worker 
with fringe benefits and working conditions at least equal to those 
provided U.S. workers. The NPRM noted that such a modification would 
make it clear that the requirement that the H-1B employer provide 
working conditions, including benefits, that will not adversely affect 
those provided similarly employed U.S. workers, requires consideration 
of similarly employed workers in the employer's own workforce and, in 
some circumstances, the prevailing conditions in the area of 
employment.
    Finally, the Department sought comment on whether it would be 
beneficial to develop a regulatory definition of ``benefits'' within 
the meaning of the ACWIA or merely to provide a list of examples. The 
NPRM noted that the ACWIA contemplates the inclusion of various forms 
of cash and non-cash compensation, such as bonuses and stock options, 
which ordinarily are considered wages.
    Several commenters, including AOTA, APTA, IEEE, and an attorney 
(Latour), generally endorsed the Department's NPRM approach in this 
area. IEEE stated that the Department's proposal ``will help implement 
the letter and the spirit of the law that the wages and working 
conditions of U.S. workers not be adversely affected'' and, at the same 
time, ``help to reduce the likelihood that employers will discriminate 
against H-1B workers by offering them less generous benefits.''
    Senators Abraham and Graham and AILA noted that the NPRM created 
some confusion by failing to make it clear that an employer must offer 
``benefits and eligibility for benefits'' on the same basis as offered 
to U.S. workers. Citing to Senator Abraham's statement in the 
Congressional Record, these commenters stated that this phraseology was 
important because workers must be or make themselves eligible to obtain 
benefits--e.g., by selecting a plan, providing partial payment, working 
for a period of time, or performing at a high level. Similarly, ACE 
requested the Department to make clear that a comparison should be made 
between the benefits offered to workers, not the benefits actually 
selected by the workers. ACE mentioned, as one example, ``cafeteria 
plans'' offered by many employers. Under these plans, it explained, 
employees choose certain benefits and not others for a variety of 
reasons.
    The Department agrees that the ACWIA requires an employer to offer 
H-1B workers benefits and eligibility for benefits on the same basis 
and in accordance with the same criteria as U.S. workers. Because 
employers often offer workers a choice of benefits, the ACWIA does not 
require that U.S. workers and H-1B workers actually receive the same 
benefits. Similarly, some employees may opt for ``family'' coverage of 
certain benefits, while others opt for ``individual'' coverage. 
Furthermore, as the commenters noted, workers may be required to meet 
certain criteria or take certain action to avail themselves of the 
benefits. However, an employer cannot satisfy its statutory requirement 
by ``offering'' benefits which it never actually provides to selecting 
workers. Thus, as discussed below, employers are required to retain 
documentation showing that employees actually receive the benefits that 
they have selected. While the Department believes that the NPRM 
comported with the statutory language, the Interim Final Rule clarifies 
these requirements in order to eliminate any ambiguity.
    AILA and ACIP agreed with the Department's proposal that an 
employer lawfully may offer and provide greater benefits to H-1B 
workers than those offered to U.S. workers. The AFL-CIO asserted the 
contrary position. In the AFL-CIO's view, an employer should be 
required to provide identical benefits to H-1B and U.S. workers, a 
result it argues is consistent with the ACWIA's ``same basis'' 
requirement. Senators

[[Page 80165]]

Abraham and Graham suggested that the statute would allow employers to 
offer benefit incentives above and beyond normal benefits to lure 
foreign-based employees with critical skills to work in the United 
States. The Senators suggested that so long as the packages are offered 
on the same basis to U.S. and foreign nationals based abroad, the 
practice should be permitted.
    In the Department's view, the statute does not require that H-1B 
workers and U.S. workers be offered the same benefits. While perhaps 
Section 212(n)(2)(C)(viii), read in isolation, could be read to require 
this result, this provision must be read in the context of the entire 
statute. Section 212(n)(2)(C)(viii) provides that it is a failure to 
meet paragraph (1)(A)--the wage requirements of the Act--to fail to 
provide the required benefits. Section 212(n)(1)(A)(i) in turn provides 
that the employer must offer wages that are ``at least'' those paid to 
similar workers. The Department notes, however, that an H-1B-dependent 
employer or willful violator, when it conducts good faith recruitment 
pursuant to section 212(n)(1)(G)(i), must offer U.S. workers the same 
compensation (including benefits) as it will offer the H-1B workers in 
the recruited positions. Furthermore, providing greater benefits to H-
1B workers may violate requirements of the various discrimination laws. 
The agencies that enforce discrimination requirements and their 
telephone numbers and website addresses are set forth above in IV.E.4, 
above.
    Senators Abraham and Graham asserted that the Department should 
look at the employer's entire benefits structure as it concerns 
``benefits eligibility for its workforce generally'' to make sure that 
the comparison is made to the right employees. These Senators and AILA 
suggested that comparisons could appropriately be made on such bases as 
part-time vs. full-time workers, positions requiring extensive travel 
vs. those that do not, relative seniority, the particular 
organizational component to which the workers are assigned, and whether 
the individual occupies a position for which special incentives should 
apply. Similarly, ACIP suggested that the Department look beyond a 
simple full-time/part-time distinction.
    The Department agrees that it should look at an employer's benefits 
structure. Employers commonly provide different benefits, for example, 
based on part-time vs. full-time status, seniority, union vs. non-
union, organizational component, etc. The Department agrees that H-1B 
workers should be provided benefits based on their position in the 
organizational structure, provided the employer utilizes the same 
distinctions on an organization-wide basis. However, the Department 
will not accept artificial distinctions which are not generally 
accepted in the industry and which have the result of denying benefits 
to H-1B workers on the basis that there are no comparable workers in 
the organization or which otherwise have the effect of discriminating 
between workers on the basis of citizenship, nationality, or other 
prohibited grounds.
    The Interim Final Rule incorporates these principles. The Interim 
Final Rule also prohibits employers from denying benefits based on the 
H-1B worker's temporary status since all H-1B workers, by virtue of 
their visa restrictions, are temporary workers. Thus, an employer by 
utilizing ``temporary'' as a basis for comparison could evade offering 
to these workers the benefits that typically would be paid to workers 
hired on a ``permanent basis,'' even though the tenure of workers in 
each group might be of comparable duration, thereby effectively 
nullifying the statutory provision. An employer would, however, be 
allowed to require that an H-1B workers meet eligibility and vesting 
requirements.
    Sun Microsystems suggested that to the extent there was a perceived 
need for greater scrutiny over fringe benefits, the Department's 
efforts should be restricted to dependent employers. The Department 
disagrees. Unlike some other provisions of the ACWIA, the ``same 
basis''/``same criteria'' provision applies to all H-1B employers.
    TCS asserted that the Department ``should clarify that, where 
length of service is applicable to the amount of the benefit, only the 
H-1B non-immigrant's length of service in the United States, and not 
the H-1B's entire length of service with the employer should be 
included in the calculation.''
    It is the Department's view that an employer is required to offer 
benefits on the same basis as it offers benefits to its U.S. employees. 
If an employer offers benefits based on length of service for the 
employer, it must offer benefits to its H-1B workers on that basis as 
well. (See the discussion below regarding treatment of multinational 
organizations.)
    APTA suggested that the INS inform all H-1B workers of their right 
to be offered the same benefits as U.S. workers, to better ensure that 
they receive the benefits due them. The Department notes that every H-
1B worker is required to receive a copy of the LCA, which contains a 
brief reference to this requirement. Section III.B of the Preamble, 
above, discusses in greater detail the Department's plans to 
disseminate information regarding the program's requirements.
    In response to the Department's query, BRI and AILA contended 
(without citing support for their position) that the ACWIA contemplates 
that an employer may satisfy the benefits attestation by offering H-1B 
workers different but ``equivalent'' benefit packages relative to the 
benefits offered to U.S. workers. BRI further stated that such benefits 
should be compared according to their monetary value.
    The Department has concluded, as a general matter, that the 
statute's ``same basis'' provision does not permit an employer to offer 
its H-1B workers benefits ``equivalent'' to but different from those 
offered its U.S. workers. The Department notes that these commenters, 
like other commenters, appeared to be concerned with benefits provided 
by multinational corporations, which are discussed separately below.
    Intel and ACIP stated that a few countries prohibit their citizens 
from owning stock in foreign corporations. Cooley Godward also raised 
the question of benefits such as stock options whose accrual will 
terminate after an H-1B employee's period of status ends.
    Although there is nothing which requires an employee to take 
advantage of a stock option, it is the Department's view that if an 
employer is aware that its H-1B worker(s) is prohibited from taking 
advantage of a stock option because of laws of the worker's home 
country, the employer should offer such worker(s) an alternative 
benefit of comparable value. With regard to the question of stock 
options or benefits which will accrue after termination of an H-1B 
worker's period of status, such benefits should be provided on the same 
basis as they would otherwise be provided to workers who are no longer 
in the firm's employ (or who have transferred back to the home office). 
If other workers have a right to exercise the option or receive the 
benefit even if they are no longer in the firm's employ, the same would 
be true with regard to H-1B workers.
    Turning to the question of treatment of employees of multinational 
firms, Senators Abraham and Graham asserted that the Department's 
proposal ``appear[s to provide no] consideration of the question of who 
the right similarly situated worker to compare [the transferee] is, and 
whether there actually is one.'' They, instead, suggested that the 
Department should focus on the transferee's status as a permanent 
employee with the

[[Page 80166]]

employer's foreign affiliate, rather than his or her status as an H-1B 
worker.
    TCS stated that it appreciated the Department's sensitivity to the 
issue of the application of the benefits requirement to employees who 
receive a range of benefits from their foreign employer and are only in 
the United States on short-term assignments in connection with their 
long-term employment with the foreign employer. TCS contended, however, 
that the requirement that H-1B workers be provided benefits equivalent 
to those received by U.S. workers is contingent upon the existence of 
``similarly employed'' workers in the United States. TCS argued that 
because it is an Indian company and its employees receive India-based 
benefits, they are not similarly employed to any computer engineers it 
might hire in the United States, and that TCS would therefore be 
relieved from any obligation to offer new benefits to its workers 
during the period of their temporary employment in the United States.
    ACIP commented that a ``length of status'' test ``wrongly assumes 
that the practice of maintaining a foreign benefits program is a matter 
of convenience, when, in fact, the practice is maintained because the 
disruption often causes the employee to lose vested interest in a 
benefit plan.'' Instead, they suggested, ``[t]he Department should 
adopt a rule that allows for a transferee to maintain his or her 
foreign benefits as long as such benefits plan is administered abroad 
continuously without interruption and as long as the company typically 
offers this option to all international transferees.'' Similar comments 
were made by AILA and Intel, which stated that it is in the employees' 
best interest to stay on ``home country'' pay and benefits. SIA also 
stated that if it is an employer's practice to have its workers 
continue to receive ``home country'' benefits when they are on a short-
period assignment in the United States, it should be allowed to 
continue to do so.
    Some commenters (ACIP, Intel, Latour) indicated that multinational 
corporations typically offer similar benefit packages to all their 
employees. Thus, ACIP stated that ``most employers already provide the 
same benefits to all workers and do not distinguish between U.S. and 
foreign nationals.'' At the same time, it noted that ``in dealing with 
a global workforce, it is sometimes necessary to provide different 
benefit packages to workers from different countries, depending upon 
the laws and social services of that country.'' Intel similarly stated 
that the vast majority of its regular full-time H-1B workers are on 
U.S. benefits; it noted that a small percentage of these workers are on 
their ``home country'' pay and benefits. Intel further stated that all 
its H-1B workers are put on U.S. medical benefits, because of ``out of 
country'' coverage problems. ACIP explained that currently employers 
may provide certain benefits to workers depending upon standards in the 
workers' home countries and the employer's international relocation 
policies. As stated by ACIP: ``Benefits may include relocation 
expenses, schooling for children, housing allowance, travel expenses, 
additional vacation time and assistance with health care or other items 
the worker is accustomed to receiving.''
    ACIP applauded the Department's effort to deal with this issue and 
supported the Department's statement that ``should the U.S. worker 
remain on the foreign plan, the U.S. employer will be held responsible 
for compliance with all H-1B regulations.''
    AILA's comment, that flexibility is needed to preserve the ability 
of the H-1B workers to preserve their existing ``home country'' 
benefits (which if interrupted could have significant and perhaps long-
term negative impact on the worker and the worker's family), was 
representative of several comments on this point.
    The Department has carefully considered the question of application 
of the benefits requirements of the ACWIA to multinational firms. The 
Department cannot agree with the construction of the statute that would 
deprive foreign-based employees of the benefit protections enacted by 
the ACWIA on the basis that they are not ``similarly employed.'' On the 
other hand, the Department believes it is appropriate to provide some 
accommodation for multinational corporate operations where ``home 
country'' benefits are equitably equivalent to the benefits provided to 
employees.
    The Department has crafted a two-part Interim Final Rule, 
distinguishing between workers who are in the United States for a short 
period of time (90 days or less) and workers who are in the United 
States for a longer period. Where H-1B workers permanently employed in 
their ``home country'' (or some other country) are not transferred to 
the United States but remain on the payroll of their permanent employer 
in their ``home country'' and continue to receive benefits from the 
``home country'' without interruption, the Department will require 
nothing further, provided the worker is in the United States for no 
more than 90 continuous days in any one visit to the United States. 
Moreover, the employer must also provide reciprocity to its U.S. 
workers i.e., U.S. workers based abroad and U.S. workers based in the 
United States must receive the benefits of their home work station (the 
station abroad or in the United States, respectively) when traveling on 
temporary business. It should be noted that this provision would allow 
H-1B workers who are not in the United States more than 90 continuous 
days in one trip to go back and forth between countries without any 
consideration to cumulative days of employment in the United States, 
provided there is no reason to believe the employer is trying to evade 
the Act's benefit requirements, such as where a worker remains in the 
United States most of the year but returns to the home country on brief 
visits.
    Once the H-1B worker has worked in the U.S. for more than 90 
continuous days (or from the point where the worker is transferred or 
it is anticipated that the worker will likely remain in the United 
States for more than 90 continuous days), the H-1B employer is required 
to offer that worker the same benefits on the same basis as provided to 
its U.S. workers unless: (1) The worker continues to be employed on the 
``home country'' payroll; (2) the worker continues to receive ``home-
country'' benefits without interruption; (3) the ``home-country'' 
benefits are equitable relative to the U.S. benefit package; and (4) 
the employer provides reciprocity (i.e., similar treatment as discussed 
above) to its U.S. workers (if any) on assignment away from their home 
work station. In the Department's view, this strikes an appropriate 
balance between meeting the statutory requirement (thereby protecting 
the benefits of U.S. workers employed in the U.S. against erosion), and 
protecting the H-1B worker's interest in preserving long-term ``home 
country'' benefits which may be threatened by the disruption of these 
benefits.
    Furthermore, as Intel noted in its comments, many health care plans 
fail to provide coverage, or fail to provide full coverage, outside 
their country's boundaries. Therefore any employer that offers health 
coverage to its U.S. workers must offer similar coverage (same plan and 
same basis) to its H-1B workers in the United States for more than 90 
continuous days unless the H-1B workers' home-country plan provides 
full coverage (i.e., coverage comparable to what they would receive at 
their home work station) for medical treatment in the United States.
    In addition, employers will be required to provide H-1B workers who 
are in the United States more than 90

[[Page 80167]]

continuous days those U.S. ``benefits'' which are paid directly to the 
worker--namely paid vacation, paid holidays, and bonuses. H-1B workers 
must also be provided working conditions and eligibility for working 
conditions (hours, shifts, vacation periods, etc.) on the same basis 
and criteria provided to U.S. workers.
    TCS argued that if the Department requires the same or even 
equivalent benefits for its workers, they will receive double 
benefits--the U.S. benefits plus their ``home country'' benefits. In 
the Department's view, TCS is mistaken. The Department's proposal 
tracks the ACWIA. Neither the proposal nor the statute requires the 
employer to continue to maintain ``home country'' benefits in such 
situations. While an employer in such situations, either by contract or 
otherwise, might be required to maintain such benefits (or it may 
decide to do so as a matter of company policy), the ACWIA does not 
impose such an obligation, nor does this rule.
    The Department received a number of comments regarding whether a 
multinational employer continuing ``home country'' benefits to H-1B 
workers need establish that the benefits provided are equivalent or 
equitable in relation to benefits provided U.S. workers. ACIP expressed 
the view that ``it [would be] extremely burdensome to put a dollar 
value on benefits received.'' Similarly, AILA stated that multinational 
employers should be able to provide equitable but non-equivalent 
benefits to H-1B workers. BRI, on the other hand, took the position 
that benefits should be equivalent, comparing their monetary value. The 
AFL-CIO, as discussed above, contended that employers should be 
required to provide identical benefits to H-1B and U.S. workers.
    The Department agrees that a multinational firm, under the 
circumstances described, should not be required to make a valuation of 
the benefits it offers and provides to U.S. and H-1B workers, but 
rather should be required, in the event of an investigation, to 
establish only that it provides benefits which are equitable in 
relation to U.S. workers' benefits. The Department finds very 
persuasive the arguments that it is in the workers' interest to allow 
employers to continue their permanent employees on ``home country'' 
benefits when working temporarily in the United States. At the same 
time, the Department believes that establishing benefits in terms of 
cost is unduly burdensome, and would not further the objective of 
establishing comparable benefits since there is no reason to believe 
even identical benefits abroad would cost the same as benefits in the 
United States.
    Only ACIP provided comments on the meaning of the phrase 
``equitable benefits.'' ACIP suggested that ``[t]he emphasis should be 
on whether the benefits package is equitable in light of basic human 
needs, similarity in treatment of all workers, how U.S. workers 
transferred abroad are treated, and the facts and circumstances of each 
H-1B worker.'' ACIP further stated: ``While we agree that the 
Department should look closely at `contrived cases,' we stress that the 
Department should look closely at the facts of each case to determine 
whether equitable benefits have been provided. * * * [T]he Department 
should not place undue emphasis on any one factor such as the 
employee's length of stay in the U.S.''
    The Department agrees that ``equitability'' between ``home 
country'' and U.S. benefits does not reduce to a bright-line test. In 
the event of an enforcement action, the Department will look into all 
the circumstances bearing upon the benefits to ensure that the H-1B 
worker's continued receipt of these benefits is not less advantageous 
to him than the benefits offered U.S. workers. This examination entails 
a qualitative rather than a quantitative review. In other words, an 
employer in these circumstances must be able to demonstrate that the 
worker's ``home-country'' benefits are equitable in relation to the 
benefits provided its U.S. workers based in the United States, 
similarity in treatment of all workers, how U.S. workers temporarily 
stationed abroad are treated, and the facts and circumstances of each 
H-1B worker. Where the employer makes this demonstration, and there is 
no appearance of contrivance to avoid payment of U.S. benefits, the 
Department will not second-guess the employer.
    Several commenters responded to the Department's request for 
comments on whether it should define ``benefits'' as that term is used 
in Section 212(n)(2)(C)(viii), which provides that the requirement to 
offer benefits and eligibility for benefits includes: ``the opportunity 
to participate in health, life, disability, and other insurance plans; 
the opportunity to participate in retirement and savings plans; and 
cash bonuses and noncash compensation such as stock options (whether or 
not based on performance). * * *''. Senators Abraham and Graham and 
AILA stated that they did not see the need for further defining 
``benefits,'' noting that the statute contains several examples of 
benefits. ACIP also stated that a regulatory definition was 
unnecessary, suggesting that instead the Department should examine the 
facts and circumstances of each case. TCS contended that the statutory 
list of benefits is exclusive; alternatively, it argued that the 
Department should specify the benefits so that employers do not have to 
guess about what is covered--e.g., is a separate office a benefit? ACIP 
asserted that ``[c]ertain cash and non-cash bonuses considered benefits 
under ACWIA are considered wages under other laws. Adopting definitions 
from other laws further confuses immigration law, does not address 
practices abroad, and may have unintended tax consequences.'' 
Similarly, ACIP, SHRM and Cowan & Miller commented that further 
definition of benefits is unnecessary. Rapidigm asked for clarification 
of the Department's statement.
    The Department agrees with the position of most commenters that the 
existing statutory definition is sufficient to administer effectively 
this aspect of the statute. The language of section 212(n)(2)(C)(viii) 
provides a fairly comprehensive list of the benefits that may be 
offered to workers in the U.S. While the use of ``including'' evinces 
an intention that the list is not exhaustive, the list, in the 
Department's view, is representative of the types of benefits that must 
be considered. Thus, an employer, by analogy, may determine whether 
other particular benefits should be taken into account. In this regard, 
the Department notes that the regulatory schemes under other 
employment-related statutes such as FMLA, the Equal Pay Act, the ADEA, 
and ERISA also provide guidance in this area. The Interim Final Rule 
takes this approach in lieu of an attempt to more fully define 
benefits. Under the Department's approach, it would appear clear that 
office accouterments--the example used by TCS--ordinarily would not 
constitute a benefit within the meaning of the statute. At the same 
time, it bears noting that the ACWIA does not relieve employers from 
any obligations they may have incurred through collective bargaining or 
otherwise with regard to particular working conditions, or of its 
obligation not to discriminate based on citizenship or national origin.
    With regard to the Department's stated intention to modify the 
current regulatory provision concerning the working condition 
attestation, ACIP, AILA, and TCS expressed the concern that the 
Department was seeking to impose a new requirement, i.e., that an 
employer was required to offer benefits to H-1B workers at least 
equivalent to the higher of those offered to their own U.S. employees 
or those prevailing in

[[Page 80168]]

the area. ACIP asserted that the Department lacks authority to require 
employers to consider conditions outside their own workforces. Rapidigm 
requested clarification on the meaning of the provision.
    After review of the ACWIA and the provisions of the H-1B program as 
a whole, the Department concurs with commenters that Congress intended 
that the requirement for offering benefits and eligibility for benefits 
to H-1B workers on the same basis and same criteria as they are offered 
to U.S. workers employed by the employer includes both benefits paid as 
compensation for services rendered and working conditions. The 
Department has therefore concluded that it is inappropriate to continue 
the provision in Sec. 655.732 which provides for consideration under 
some circumstances of prevailing conditions in the area of employment. 
Section 655.732 therefore is revised in the Interim Final Rule to 
clearly require that working conditions be provided to H-1B workers on 
the same basis and same criteria as they are offered to U.S. workers.
    The Department also believes that certain benefits appropriately 
are in the nature of compensation for service rendered, and have a 
monetary value to workers and monetary cost to employers. Such benefits 
include cash bonuses, paid vacations and holidays, and termination pay, 
which are paid directly to workers and are taxable when earned. Also 
included are benefits such as health, life and disability insurance, 
and deferred compensation such as retirement plans and stock options 
which are funded by employers, either directly as costs are incurred or 
through contributions to fringe benefit plans or insurance companies. 
The Department has concluded that such benefits are more in the nature 
of wages than working conditions, although the Department cautions that 
only benefits which meet the criteria of Sec. 655.731(c)(2) count 
toward satisfaction of the required wage since such benefits are not 
included in surveys used to determine the prevailing wage. On the other 
hand, benefits which do not have a direct monetary value to workers or 
cost to employers, are in the nature of working conditions, including 
matters such as seniority, hours, shifts, and vacation periods, and 
preferences relating thereto. Sections 655.731 and 655.732 are amended 
to reflect this distinction.
2. What Documentation Will Be Required? (Sec. 655.731(b))
    The Department proposed to require H-1B employers to retain copies 
of fringe benefit plans and summary plan descriptions provided to 
workers, including all rules relative to eligibility and benefits, and 
documents showing the benefits actually provided and how the costs are 
shared between the workers and the employer. The Department sought 
suggestions as to exactly what records would demonstrate the value of 
benefits and satisfy the other retention requirements. The Department 
expressed the view that such records already are required for IRS and 
ERISA purposes (although noting in the paperwork analysis, at 64 FR 
630, that a small percentage of employers might be required to keep 
records that otherwise would not be kept). In connection with the 
Department's query whether it might be possible to provide different 
``home country'' benefits to employees of a multinational corporate 
operation in lieu of those provided to U.S. workers, the Department 
sought comment on what records would be necessary to demonstrate the 
relative value of the ``home-country'' benefits and the benefits 
provided to U.S. workers.
    Many of the commenters opposed the notion of maintaining particular 
documentation in order to demonstrate compliance with the benefits 
attestation. ACIP and AILA asserted that the statute does not authorize 
the Department to require employers to retain documentation, suggesting 
that it is up to an employer to decide what documentation, if any, it 
should retain in order to demonstrate its compliance if it is 
investigated. Similarly, Senators Abraham and Graham stated: ``DOL is 
not authorized to require employers to maintain any particular 
documentation.'' The Department cannot, they asserted, include as part 
of the proposed LCA a ``new attestation'' that ``[the employer] will 
develop and maintain documentation of working conditions and 
benefits.''
    ACIP addressed particular burdens it perceived in retaining such 
documentation, noting, for example, that they already maintain such 
documentation in a location or in a format different than that 
contemplated by the Department. While ACIP recognized that the 
Department correctly stated that employers now keep documents related 
to their fringe benefit plans, ACIP stated that these documents may be 
housed in various departments and urged the Department to let the 
employer decide where documentation must be kept. ACIP further 
explained that much information is sensitive and confidential (e.g., 
stock option and incentive pay plans), requiring the Department, in its 
view, to allow an employer flexibility in documenting these benefits.
    Intel stated that summary plan descriptions are a U.S. requirement. 
It noted that no other countries required the same depth and detail 
regarding the documentation of benefits, though stating that about one-
half of its foreign subsidiaries have some benefits documentation. 
Intel explained that all its employees at orientation receive 
information regarding the company's benefits; in the U.S., it stated 
that employees receive a book that describes benefits, and that each 
year employees receive a particularized benefit portrait. Intel 
asserted that further documentation should not be required; it contends 
that a memorandum to the public access file that its employees are 
advised of the company's benefits at time of their hire should suffice.
    Satyam questioned whether current requirements under other statutes 
and regulations relating to the retention of benefits documents would 
suffice for H-1B purposes; it suggested that the Department should not 
require putting specific information in the public access file. It also 
inquired whether it would be necessary to retain information relevant 
to the comparison group. ITAA said that the Interim Final Rule should 
recite rather than refer to IRS and PWBA requirements. AILA expressed 
the concern that the Department will make it a violation to fail to 
keep copies of benefits documents in a public access file and that 
requiring documentation to be kept up front would impose a huge burden. 
AILA recommended instead that an employer, for example, be simply 
required to bear the burden of proving the ``equivalency'' of foreign 
benefits in the event of an investigation.
    None of the commenters took issue with the Department's statement 
that the documents sought are required already by IRS or ERISA.
    Based on our review of the comments received on the proposal, it is 
apparent that the documentation requirements proposed in the NPRM have 
been misunderstood. With the exception of documentation specifically 
required to be retained in the public access file, there is no 
requirement that information be kept in any particular format or place, 
or that information be segregated by LCA, by locality, by H-1B versus 
U.S. workers, or in any other way from the employer's records for the 
entire company.

[[Page 80169]]

    Nothing in the ACWIA suggests that documentation requirements are 
unauthorized or otherwise improper. To the contrary, section 212(n)(1) 
specifically requires employers to make the LCA ``and such accompanying 
documents as are necessary'' available for public examination. The 
Department believes that this provision clearly permits the Department 
to determine what documents must be created or retained by employers to 
support the LCA. The documentation that is required by the Interim 
Final Rule simply effectuates the more specific requirements imposed by 
the ACWIA. Furthermore, as the NPRM stated, the documents sought for 
the most part are already required by the IRS or ERISA, and would be 
kept by an ordinary prudent businessman in any event. Thus, the 
Department's ERISA regulations require at 29 CFR part 2520 that summary 
plan descriptions be provided to participants, and require employers to 
submit lengthy forms (Form 5500) to IRS with detailed information 
regarding their fringe benefits plans, which must be substantiated by 
records. In addition, EEOC rules under the ADEA, 29 CFR 1627.3(b)(2), 
require that every employer retain copies of all employee benefit 
plans, as well as copies of any seniority systems and merit systems 
which are in writing. Where the plan is not in writing, a memorandum 
fully outlining its terms and how it has been communicated to employees 
is required.
    The Department believes that it is essential that employers, in 
order to establish that H-1B workers have in fact been offered the same 
benefits as U.S. workers (or that the special benefit requirements for 
certain employees of multinational firms are met), retain a copy of any 
document provided to employees describing the benefits offered to 
employees, the eligibility and participation rules, how costs are 
shared, etc. (e.g., summary plan descriptions, employee handbooks, any 
special or employee-specific notices that might be sent). It is also 
important that employers keep a copy of all benefit plans or other 
documentation describing benefit plans and any rules the employer may 
have for differentiating among groups of workers. In addition, the 
employer will be required to retain evidence as to what benefits are 
actually provided to U.S. and H-1B workers. Where employees are given a 
choice of benefits, employers will be required to retain evidence of 
the benefits selected or declined by employees.
    For multinational employers who choose to keep H-1B workers on 
``home country'' benefit plans, the employer will be required to 
maintain evidence of the benefits provided to the worker before and 
after the employee went to the United States. In the event of an 
investigation, the employer will also be required to demonstrate that 
the other requirements for multinational firms are met, as 
appropriate--e.g., that the employer maintains reciprocity by treating 
U.S. workers coming to the United States temporarily from abroad the 
same as H-1B workers, and likewise continues U.S. workers temporarily 
overseas on U.S. benefits, that the worker was not in the United States 
for more than 90 continuous days, that ``home country'' benefits are 
equitable in relation to U.S. benefits, etc.
    With regard to the public access file, the employer need only 
maintain a summary of the benefits offered to U.S. workers in the same 
occupation as H-1B workers, including a statement explaining how 
employees are differentiated where not all employees in the occupation 
are offered the same benefits. If an employer has workers receiving 
``home country'' benefits, the employer may place a simple notation to 
that effect in the file. The public access file need not show the 
proprietary details of a plan (such as a stock option or incentive 
distribution plan), the costs of providing the benefits, or the choices 
made by individual workers.
    Since the regulations do not allow an employer to provide 
equivalent benefits as a general matter, and provide an ``equitable'' 
rather than an ``equivalent'' test for multinational benefits, no 
special documents regarding the cost of benefits are required.

H. What Does the ACWIA Require of Employers Regarding Payment of Wages 
to H-1B Nonimmigrants for Nonproductive Time? (Sec. 655.731(c)(7))

    On October 31, 1995, the Department republished for comment a 
provision of the December 20, 1994 Final Rule which articulated the 
Department's position regarding payment of the required wage for 
nonproductive time. This provision, Sec. 655.731(c)(5), required 
payment of the required wage beginning no later than the first day the 
H-1B nonimmigrant is in the United States and continuing throughout the 
nonimmigrant's period of employment, including periods when the 
nonimmigrant is in nonproductive status due to employment-related 
reasons such as training or lack of assigned work. The provision did 
not require payment of such wages where the nonproductive status is due 
to reasons unrelated to employment (e.g., caring for an ill relative), 
provided the nonimmigrant's unpaid status is acceptable to the INS and 
is not subject to a wage payment obligation under some other statute 
(e.g., Family and Medical Leave Act). The provision distinguished 
between full-time and part-time workers as provided on the I-129 
petition filed with INS, but stated that in the event a part-time 
employee regularly worked a greater number of hours than stated on the 
I-129, the employer would be held to the actual hours disclosed in the 
enforcement action. Section 655.731(c)(5) was among the provisions of 
the December 20, 1994 Final Rule which had been enjoined from 
enforcement, due to lack of notice and comment, by the court in 
National Association of Manufacturers v. United States Department of 
Labor.
    Subsequently, the ACWIA, amending section 212(n)(2) of the INA, 
enacted an explicit requirement, consistent with the Department's 
regulation, providing that it is a violation of the wage attestation in 
section 212(n)(1)(A) for an employer to fail to pay an H-1B worker the 
required wage for certain nonproductive time. Like the Department's 
regulation, an exception was created for nonproductive status which is 
due to non-work-related factors such as the worker's own, fully 
voluntary request, or circumstances rendering the worker unable to 
work. Under this provision, workers designated as full-time on the 
petition filed with INS must be paid full-time wages, and employees 
designated as part-time on the petition must be paid the hours 
designated in the petition. This obligation is effective ``after the H-
1B worker has entered into employment with the employer,'' but in any 
event, not later than 30 days after the worker's date of admission to 
the United States (if entering the country pursuant to the petition) or 
60 days after the date the worker ``becomes eligible to work for the 
employer'' (if already in the country when the petition is approved). 
The statute also contains a special provision regarding academic 
salaries which is discussed in IV.I, below.
    Congressman Smith and Senator Abraham, in their remarks after 
enactment of the ACWIA, noted that the most extreme examples of 
``benching'' occur when workers are brought to the United States on the 
promise of a certain wage, but only receive a fraction of that wage 
because the employer does not have enough work for the H-1B worker. 144 
Cong. Rec. E2326 (Nov. 12, 1998); 144 Cong. Rec. S12753-54 (Oct. 21, 
1998). They also both agreed that employers must pay full wages and 
benefits during an H-1B worker's non-productive status when that status 
is due to the employer's decision--based

[[Page 80170]]

on factors such as lack of work for the worker--or due to the worker's 
lack of a license or permit. Congressman Smith also remarked that 
Congress anticipated the Secretary's close scrutiny of 
``voluntariness'' in circumstances that appear to be contrived to take 
advantage of unpaid time. Senator Abraham listed the following examples 
of H-1B employees taking unpaid leave which he stated would not be 
considered ``benching'': leave under FMLA or other corporate policies, 
annual plant shutdowns for holidays or retooling, summer recess or 
semester breaks, or personal days or vacations. Senator Abraham also 
stated that this provision does not prohibit an employer ``from 
terminating an H-1B worker's employment on account of lack of work or 
for any other reason.'' Congressman Smith stated that an attempt by an 
employer to avoid compliance with the ``benching'' provision by laying 
off an American worker ``would trigger the enforcement and penalty 
provisions of the Act.''
    Congressman Smith and Senator Abraham agreed that the benching 
provision is not intended to preclude part-time H-1B employment, agreed 
to between the employer and the H-1B worker when the worker was hired. 
144 Cong. Rec. E2326 (Nov. 12, 1998); 144 Cong. Rec. S12754 (Oct. 21, 
1998). Congressman Smith stated that ``the employer's misrepresentation 
of this material fact should be scrutinized by the Secretary'' in 
determining whether a benching violation or misrepresentation has been 
made, with particular attention to whether U.S. workers would receive 
paid leave for nonproductive time. Senator Abraham stated that the Act 
is not intended to give the Secretary the authority ``to reclassify an 
employee designated as part-time based on the worker's actual workload 
after the employee begins employment.''
    In the NPRM, the Department proposed regulatory text which, except 
for the different statutory language triggering the beginning of the 
period in which the ``benched'' worker must be paid, is very similar to 
its current regulation. In the preamble, the Department stated that it 
was considering whether the H-1B worker ``enters into employment'' when 
he first makes himself available for work, such as by reporting for 
orientation or training, or when the worker actually begins receiving 
orientation or training or ``otherwise performs work or comes under the 
control of his employer.'' In commenting on the purpose of the 
``benching'' provision, the Department observed that an H-1B 
nonimmigrant is not permitted to be employed by another employer while 
``benched'' (unless another employer files a petition on behalf of the 
worker or the worker adjusts his or her status under the INA), and is 
without any legal means of support in the country. In contrast, a U.S. 
worker can seek other employment and would be eligible for Federal 
programs such as food stamps. The Department also observed that the 
employer, at any time, may terminate the employment of the worker, 
notify INS, and pay the worker's return transportation, thereby ceasing 
its obligations to pay for non-productive time under the H-1B program. 
The Department proposed that payment of wages would not be required 
where the nonproductive status is due to reasons unrelated to 
employment, unless such payment is required by INS as a condition of 
the worker maintaining lawful status, or is required by some other Act 
such as FMLA. On the other hand, the employer would not be relieved 
from the wage obligation for any required leave of absence, even if it 
includes U.S. workers.
    The Department received three comments on the 1995 proposed rule on 
this issue. Regarding the requirement in the 1995 NPRM that the 
employer pay the required wage for nonproductive time beginning no 
later than the first day the H-1B nonimmigrant is in the United States 
and continuing throughout the nonimmigrant's period of employment, AILA 
suggested that it would be more reasonable to require the employer to 
begin paying on the day that the nonimmigrant actually reports to work, 
provided that the date is no later than 30 days after the date the 
nonimmigrant enters the U.S. or otherwise becomes eligible to work for 
the employer. AILA also suggested that an exception be made where the 
nonimmigrant is given an unpaid leave of absence pursuant to a 
uniformly-enforced company policy. Similarly, another commenter, an 
electronics manufacturer (Motorola), complained that in the case of a 
temporary reduction in force, the employer would have to retain the H-
1B nonimmigrant at full salary, while U.S. workers are off the payroll.
    The Department received 33 comments on the 1999 NPRM proposals 
addressing the ACWIA's ``benching'' provisions. APTA stressed the 
importance of the Department ensuring that H-1B nonimmigrants are aware 
of their wage rights for nonproductive time. Miano commented that 
companies should not be allowed to use the H-1B program to create 
stables of available employees in anticipation of openings that do not 
yet exist, but should be required to demonstrate that an unfilled 
position actually exists.
    The Department agrees that it is important that H-1B nonimmigrants 
be aware of their rights. For this reason, Sec. 655.734(a)(3) requires 
that all H-1B nonimmigrants be provided a copy of the LCA which 
supports their petition. In addition, the Department is planning a 
comprehensive educational program, as discussed in III.B, above.
    AILA suggested that the Department add to its list of exceptions 
situations where objective economic reasons are present, such as annual 
retooling in the automobile industry for production model changes. ACIP 
and SIA urged the Department to adopt Senator Abraham's October 21, 
1998 comments as examples of what is not benching, i.e. leave under the 
Family and Medical Leave Act; or other corporate policies for no 
payment such as annual plant shutdowns for holidays or retooling, 
summer recess or semester breaks, or personal days or vacations. ACIP 
also urged that similar situations be included in the list of examples 
which do not constitute benching, such as disciplinary action, 
mandatory unpaid pre-employment training or orientation, mandatory 
vacation leave, and periods of downturn where all workers are treated 
the same. ACIP suggested that the facts and circumstances of each case 
be considered, including whether similarly-situated U.S. workers are 
placed on leave and whether H-1B workers knew before accepting 
employment of the possibility of such leave. ACIP and SIA encouraged 
the Department to exercise flexibility to avoid the potential effect of 
companies laying off U.S. workers to avoid the benching of H-1B workers 
by allowing for periods attributable to regular, objective business 
occurrences such as cyclical business downturns, holiday plant 
shutdowns, and plant retooling. They observed that when these events 
occur all workers are treated equally, according to the same standards.
    The AFL-CIO and other commenters observed that the provision's 
prohibition against ``benching'' may lead employers to treat H-1B 
employees better than U.S. workers, and may create the situation where 
an employer retains an H-1B worker over an American worker during a 
lay-off to avoid paying full wages to the H-1B worker. The AFL-CIO 
stated its belief that U.S. workers who are laid off to avoid the 
benching provision may have grounds for a discrimination complaint 
based on nationality and immigration status and that the regulation 
should so indicate.
    The Department believes that the statutory language is clear. The 
statute

[[Page 80171]]

requires payment, after a nonimmigrant has entered into employment with 
an employer, whenever nonproductive status is due to a decision by the 
employer or to the nonimmigrant's lack of a permit or license. In 
contrast, payment is not due when the nonproductive time is due to non-
work-related factors, such as the voluntary request of the nonimmigrant 
for an absence or circumstances rendering the nonimmigrant unable to 
work. Therefore the Department cannot interpret the Act to allow 
employers to be relieved from payment for periods where the employer's 
business is shutdown, regardless of whether it affects U.S. workers as 
well, whether for economic downturn, annual retooling, or holiday 
shutdown; nor can the employer be relieved from liability for mandatory 
vacation, pre-employment training, or disciplinary action. All of these 
situations are caused by the employer, rather than at the voluntary 
request of the nonimmigrant. The Department notes that training or 
orientation required of an employee before productive work starts has 
always been considered compensable time under the Fair Labor Standards 
Act, and that the Department has required payment for such time in its 
enforcement of the H-1B attestation requirements since the injunction 
entered in the NAM litigation. If an employer finds need to discipline 
an H-1B nonimmigrant, it must find a method other than loss of pay, or 
it may terminate the employment relationship.
    The Department understands the concern expressed regarding the 
possibility of an employer laying off U.S. workers while continuing to 
pay H-1B workers because of its obligation to continue paying H-1B 
workers during periods of nonproductive status. Congressman Smith 
suggested that an employer's action in laying off U.S. workers to avoid 
placing H-1B workers in nonproductive status for which they must be 
paid would be a violation of the ACWIA. We agree, with respect to H-1B-
dependent employers and willful violators, where the required showing 
for a prohibited displacement under section 212(n)(1)(E) or (F) is 
made. In addition, we note that a displacement in connection with a 
willful violation of the attestation requirements or a willful 
misrepresentation can bring enhanced penalties pursuant to section 
212(n)(2)(C)(iii). Additionally, other laws provide U.S. workers with 
rights and remedies for an employer's discriminatory practices. The 
names, telephone numbers, and websites of the three federal agencies 
responsible for enforcement of anti-discrimination laws are set forth 
in IV.E.4, above.
    The Department notes that--in determining whether the statutory 
criteria have been met, including the exception for nonpayment based on 
``the voluntary request of the nonimmigrant for an absence''--it will 
look closely at any situation where there is any question about whether 
the period of nonproductive time is truly voluntary. The Department 
will not under any circumstances consider the employer to be relieved 
of wage liability where there is a plant shutdown. Nor will the 
Department relieve an employer from liability simply because the 
employee agreed to periods without pay in the employment contract.
    ACIP and AILA questioned the basis for the Department's proposed 
requirement that workers be paid where required by other statutes such 
as FMLA or the ADA, and that the worker's period of unpaid leave be 
consistent with maintenance of status under INS regulations.
    The Department intended to say nothing more than that an employer 
must comply with other laws. The Department notes that FMLA only 
requires paid leave where the employer has a paid leave plan and either 
the employer or the employee wishes to substitute the paid leave for 
unpaid FMLA leave. Since the employer is required to offer H-1B workers 
the same benefits as U.S. workers, an employer would be required to 
provide H-1B workers with paid leave under any circumstances in which 
it is provided to U.S. workers. Enforcement of this requirement during 
periods where the employee voluntarily takes leave or is unable to 
work, is in accordance with the benefit obligations at section 
212(n)(2)(C)(viii). The Department also wishes to point out, as stated 
by both Senator Abraham and Congressman Smith, that during periods of 
nonproductive time, employers are required to provide fringe benefits 
as well as wages.
    ACIP and AILA agree with the proposal that an employer may choose 
to terminate an H-1B worker without violating the benching provision. 
ACIP also suggests that employers should not be held liable for the 
nonimmigrant's failure to leave the country.
    The Department agrees that an employer is no longer liable for 
payments for nonproductive status if there has been a bona fide 
termination of the employment relationship. The Department would not 
likely consider it to be a bona fide termination for purposes of this 
provision unless INS has been notified that the employment relationship 
has been terminated pursuant to 8 CFR 241.2(h)(11)(i)(A) and the 
petition canceled, and the employee has been provided with payment for 
transportation home where required by section 214(E)(5)(A) of the INA 
and INS regulations at 8 CFR 214.2(h)(4)(iii)(E). In accordance with 
current INS policy (see 76 Interpreter Releases 378), once an employer 
terminates the employment relationship with the H-1B nonimmigrant, 
regardless of any arrangements for severance pay or benefits, that H-1B 
employee must either depart the United States upon termination of his 
or her services, or seek a change of immigration status for which he or 
she may be eligible. Therefore, under no circumstances would the 
Department consider it to be a bona fide termination if the employer 
rehires the worker if or when work later becomes available unless the 
H-1B worker has been working under an H-1B petition with another 
employer, the H-1B petition has been canceled and the worker has 
returned to the home country and been rehired by the employer, or the 
nonimmigrant is validly in the United States pursuant to a change of 
status.
    Commenters also offered their views on the phrase ``entered into 
employment,'' one of the alternative triggers for an employer's 
obligation to pay the H-1B worker wages during periods of nonproductive 
status. The Department proposed that this term means the date when the 
H-1B worker makes himself/herself available for work, e.g., reports for 
orientation or training, performs work for the employer, or is under 
the control of the employer. One attorney-commenter (Hammond) expressed 
appreciation for this ``bright line test'' and described the 30-day 
allowance as reasonable.
    The Department received twenty essentially identical comments on 
this issue from individuals who urged payment of wages to nonimmigrants 
immediately on their arrival to the United States. The AEA suggested 
that the H-1B visa holder be given a firm starting date from his/her 
employer and that wages start from that date. AOTA commented that 
``entered into employment'' should mean when the nonimmigrant makes 
himself or herself available for work. ACIP urged the Department to 
look at the facts of the case, but urged as a general matter that an H-
1B worker has entered into employment when he or she has reported to 
the worksite, has been placed on the payroll, and has completed an I-9 
form; ACIP stated that H-1B workers should not be required to be paid 
for short periods of unpaid

[[Page 80172]]

training or orientation or medical examinations, since U.S. workers are 
not. AILA suggested that ``entered into employment'' occurs when the 
employee actually commences the orientation, training or work because 
ACWIA, in mandating payments by the 30-day and 60-day deadlines, 
appears to provide the employer with discretion regarding the starting 
date prior to those deadlines.
    The statutory language does not permit the Department to define the 
term ``entered into employment'' as the date the H-1B worker arrives in 
the United States. Likewise, payment of wages by the employer cannot be 
required before the H-1B petition is approved. On the other hand, the 
Department notes that the Fair Labor Standards Act itself requires that 
where there is an employment relationship (including where the worker 
has been promised employment, even if the employee is not yet on the 
payroll), both H-1B and U.S. workers be paid for orientation or 
training time required by the employer.
    The Department has concluded that the term ``entered into 
employment'' means the date on or after the date of need on the H-1B 
petition when the worker makes himself or herself available for work or 
otherwise comes under the control of the employer and includes all 
activities thereafter, such as waiting for an assignment, going to an 
interview or meeting with a customer, attending orientation, studying 
for a licensing examination.
    Several employers, attorneys and organizations also commented on 
the meaning of the phrase ``eligible to work for the employer.'' (Sixty 
days thereafter an H-1B nonimmigrant already in the United States 
legally under another visa (e.g., F-1 student visa) or on another H-1B 
visa with another employer must be paid for nonproductive time, even if 
the H-1B nonimmigrant has not yet entered into employment.) One law 
firm (Hammond) encouraged flexibility on the 60-day test. An employer 
(BRI) urged that ``eligible to work for the employer'' should be based 
on the agreement of employment terms between the employer and employee 
and determined by the date an employment agreement is entered into 
between the employer and employee or the completion of the visa 
process, whichever comes last.
    ACIP and Intel requested a specific exception from the benching 
regulations for export control licenses. ACIP explained that an 
employee who awaits a license to practice his or her profession in the 
United States, and is subject to the ACWIA benching provisions, is 
distinguishable from an export control license which must be procured 
by an employer in a process which can take three to six months. 
Therefore, ACIP suggested that the rule provide that where an export 
license and H-1B petition were filed concurrently but the export 
license is not approved within the 60-day window, the employer has an 
additional 90 days to obtain the license before being required to 
rescind the H-1B petition or pay the worker.
    The Department continues to believe that an employee is eligible to 
work on the date of need stated in the petition, provided that the 
petition has been processed and the employee has either received a visa 
or had his/her status adjusted (where the employee is in the United 
States). The Department sees no basis for any exception based on the 
export control license. Clearly the employee is legally eligible to 
work, but work is simply not available (even if due to circumstances 
beyond the employer's control). The Department agrees that a worker 
need not be compensated if the H-1B nonimmigrant voluntarily chooses 
not to make himself or herself available for work, such as where the 
nonimmigrant has not yet finished school or chooses to remain with 
another employer in order to finish a project. In each case, although 
the H-1B nonimmigrant is eligible to work for the employer, he or she 
need not be paid because of the nonimmigrant's voluntary action. The 
Department notes, however, that the nonimmigrant may be out of status 
if he or she does not report to work on the date of need.
    In response to the NPRM's proposals on nonproductive pay for part-
time workers, Senators Abraham and Graham and AILA objected to the 
regulatory language requiring workers be paid for hours that exceed the 
part-time number of hours on the INS petition where in practice the 
worker regularly works a longer schedule. AILA seeks to allow an 
employer which has less work than anticipated after filing an I-129 
petition for full-time work, to secure approval of a new I-129 petition 
for part-time work, after which the employer is obliged to pay only for 
the part-time work.
    In addition, Latour commented that the traditional 40-hour week is 
rapidly changing. It stated that some firms engage workers to perform a 
project which is completed in less than a year, and then the worker has 
several months off and may ``moonlight'' at a second job (presumably 
under a second petition). Latour assumed this practice would be 
considered ``part-time,'' and suggest that DOL focus on three issues in 
determining if there is a violation of the ``benching'' provision: (1) 
Whether the prevailing wage is being paid; (2) whether the worker is 
making a plausible living; (3) whether the nature of the employment 
schedule is usual and reasonable for the type of work.
    The Department agrees that nonproductive pay is based on the number 
of hours per week on the H-1B petition. The LCA has therefore been 
amended to alert employers that their H-1B employees should not 
regularly work more than the number of hours shown on the petition, 
which may be expressed as a range of hours. If the H-1B worker normally 
works full-time or a greater number of hours than shown on the 
petition, the Department will examine the facts and circumstances and 
charge the employer with misrepresentation where appropriate. In light 
of the importance of the distinction between part-time and full-time 
employment for purposes of the employer's wage obligations, the 
Department has modified the proposed LCA form to specify that the 
employer is to designate that the position(s) covered will be either 
part-time or full-time; a combination of part-time and full-time 
positions cannot be entered on a single LCA form.
    The Department cautions employers that time spent in training or 
studying to get a license is ordinarily compensable hours worked under 
the Fair Labor Standards Act without regard to any rules on payment for 
nonproductive time under the H-1B program.
    The Department agrees with AILA's comment that an employer may 
secure approval of a new H-1B petition for part-time work, after which 
the employer is obliged to pay only for the part-time work. The 
nonproductive pay computation is based on the petition that is in 
effect at the time the H-1B worker is in nonproductive status. 
Correspondingly, before INS approves a new petition that changes the 
work time (part-time to full-time or vice versa), the employer will 
need to file a new LCA that reflects the change.
    Finally, the Department disagrees that the scenario described by 
Latour is part-time work. Rather, it is full-time work with periods 
where no work is available due to actions of the employer, rather than 
the employee. This period of non-productive work must be paid unless 
the worker is temporarily unable to return to work because of alternate 
commitments or other factors within the control of the employee.

[[Page 80173]]

I. What Special Rule Does the ACWIA Provide for Academic Salaries? 
(Sec. 655.731(c)(4))

    The ACWIA provision on non-productive time (``benching'') 
(discussed in IV.H, above) has a special rule permitting ``a school or 
other education institution'' to apply an established salary practice 
which might result in an H-1B worker appearing to be ``unpaid'' for 
some part of a calendar year. See Section 212(n)(2(C)(vii)((V) of the 
INA as amended by the ACWIA. Specifically, that provision allows an 
education institution to disburse an annual salary to its H-1B workers 
and U.S. workers in the same occupational classification over fewer 
than 12 months if: (1) The H-1B worker agrees to the compressed annual 
salary payments prior to commencing payment, and (2) the salary 
practice does not otherwise cause any violation of the H-1B worker's 
authorization to remain in the United States.
    Congressman Smith and Senator Abraham both explained that this 
provision ``is intended to make clear that a school or other 
educational institution that customarily pays employees an annual 
salary in disbursements over fewer than 12 months may pay an H-1B 
worker in the same manner without violating clause (vii), provided that 
the H-1B worker agrees to this payment schedule in advance.'' 144 Cong. 
Rec. E2326 (Nov. 12, 1998); 144 Cong. Rec. S1275 (Oct. 21, 1998). 
Congressman Smith explained that Congress ``specifically limited this 
exemption to schools and educational institutions in recognition of 
their unique salary patterns.'' 144 Cong. Rec. E2326. Senator Abraham, 
on the other hand, stated:

    Because Congress is not aware of all the possible kinds of 
legitimate salary arrangements that employers may establish, the 
situation covered by subclause (V) may be merely illustrative of 
other kinds of legitimate salary arrangements under which an 
employee's rate of pay may vary. Accordingly, so long as an H-1B 
worker is not being singled out by such a salary arrangement, it is 
not Congress's intent that such a salary arrangement be treated as 
suspect under or violative of clause (vii) merely because there is 
no special provision like subclause (V) addressing it. To the 
contrary, if it is an arrangement that the employer routinely uses 
with U.S. employees as well as H-1B workers, it should be treated as 
presumptively not a violation of that clause.''

144 Cong. Rec.S1275 9 (Oct. 21, 1998).
    The one commenter on this provision, ACE, urged the Department to 
follow the law as written with no further regulation.
    As the Department explained in the NPRM, the Department believes 
that this provision is directed to the common practice by which 
colleges, universities, and other educational institutions disburse 
faculty salaries over a nine-or ten-month period, with no salary 
payments during the summer, between academic quarters, or over some 
other period during which the faculty member may be away from the 
institution. As the statute provides, this special rule applies only to 
schools and other educational institutions. Any attempts to apply the 
more general definition of organizations to which the special 
prevailing wage requirements apply (see section 212(p)(1) of the INA as 
amended by the ACWIA) would change the statutory mandate. The 
Department has concluded that the NPRM properly implements the 
statutory mandate and will adopt the provision as proposed.

J. What Actions or Circumstances Would be Prohibited as a ``Penalty'' 
on an H-1B Nonimmigrant Leaving an Employer's Employment? 
(Sec. 655.731(c)(10)(i))

    Section 212(n)(2)(C)(vi)(I) of the INA as amended by the ACWIA 
prohibits an employer from ``requir[ing] an H-1B nonimmigrant to pay a 
penalty for ceasing employment with the employer prior to a date agreed 
to by the nonimmigrant and the employer.'' This section requires the 
Department to ``determine whether a required payment is a penalty (and 
not liquidated damages) pursuant to relevant State law.'' As discussed 
in Sections L and M of the NPRM, section 212(n)(2)(C)(vi)(III) provides 
that the Department, after notice and opportunity for a hearing, ``may 
impose a civil money penalty for each such violation and issue an 
administrative order requiring the return to the [H-1B worker] of any 
amount paid in violation * * *, or if [the H-1B worker] cannot be 
located, requiring payment of any such amount to the general fund of 
the Treasury.''
    Senator Abraham explained:

    New clause (vi)(I) * * * directs that the Secretary is to decide 
the question whether a required payment is a prohibited penalty as 
opposed to a permissible liquidated damages clause under relevant 
State law (i.e. the State law whose application choice of law 
principles would dictate). Thus, this section does not itself create 
a new federal definition of ``penalty'', and it creates no authority 
for the Secretary to devise any kind of federal law on this issue, 
whether through regulations or enforcement actions.''

144 Cong. Rec. S12752 (Oct. 21, 1998). Congressman Smith further 
explained that ``[t]his provision was added because of numerous cases 
that have come to light where visa holders or their families were 
required to make large payments to employers because the worker secured 
other employment.'' 144 Cong. Rec. E2325 (Nov. 12, 1998).
    In the NPRM, the Department proposed to prohibit employers from 
attempting to enforce any such liquidated damages provisions without 
first obtaining a State court judgment ordering the H-1B worker to make 
such a payment. The Department explained its view that State courts 
were better versed than the Department to resolve State law questions 
posed by such matters. The Department also stated its intention to make 
it clear that employers cannot collect the additional $500 petition fee 
in the guise of liquidated damages, and noted its concern that some 
employers might attempt to collect liquidated damages in situations 
where the employers' unlawful conduct may have caused the H-1B worker 
to prematurely leave the employment.
    A number of commenters responded to the Department's proposals on 
this issue. Two commenters (Latour, Padayachee) endorsed the approach 
taken in the NPRM. Padayachee also expressed the view that only 
quantifiable liquidated damages should be claimable. A third commenter 
(TCS), generally agreed with the Department's approach, although noting 
some specific objections as identified below.
    The view most frequently expressed by other commenters was that the 
Department's approach was contrary to the intent of the ACWIA. These 
commenters (Senators Abraham and Graham and other Congressional 
commenters, ACIP, AILA, and other employers and employer 
representatives) viewed the proposal as inconsistent with the role 
intended for the Department under the ACWIA, i.e., to determine whether 
or not a specific liquidated damages provision is legal under State 
law. Nallaseth and SBSC asserted that it would be discriminatory to 
require employers to first secure a State court judgment in enforcing 
an agreed damages provision against an H-1B worker when none is 
required to enforce a similar provision involving a U.S. worker. While 
some commenters recognized that the Department's concern about the 
difficulty of identifying and applying State law to a particular 
dispute was well-founded, it was their view that Congress intended the 
Department, not the State courts, to shoulder this burden. Senators 
Abraham and Graham asserted that the proposal that an employer obtain a 
State court judgment as a precondition to enforcing its contractual 
agreement--a practice,

[[Page 80174]]

they stated, they were not aware of under any State's law--constituted 
an attempt by the Department to create federal law on this question in 
contravention of the statute's direction that State law was to be 
applied in resolving such matters. They stated that it was the 
intention of Congress not to require litigation over each such 
agreement, but instead to allow the Department to bring an enforcement 
action if it believes an agreement is punitive as a matter of State 
law.
    Congressional commenters and Network Appliance objected to any 
requirement that employers obtain a state court judgment where there is 
no disagreement between the parties. ACIP asserted: ``Requiring a state 
court judgment to enforce any part of a contract is an unreasonable 
intrusion upon the ability of parties to contract and limits their 
ability to settle disputes through mediation, arbitration or other 
forms of alternative dispute resolution. * * * [A]lthough we agree that 
individual state courts are much better versed in this area of their 
law for their state than the Secretary, it clearly was not Congress' 
intent to impose such a high burden on employers.'' TCS, on the other 
hand, asserted that a State court judgment should be a prerequisite to 
any finding of a violation by the Department, limiting its objection 
primarily to the Department's proposal that a State court judgment must 
be obtained, even where there is no dispute by the parties or they 
choose to resolve the dispute by settlement or otherwise.
    As an alternative to the Department's proposal, ACIP, AILA, and SIA 
suggested that the regulation set forth examples of acceptable 
reimbursements and examples of prohibited penalties. AILA and TCS 
requested that the Department prohibit any class-based complaint or 
relief in the administrative proceeding, i.e., to limit the relief to 
the particular H-1B worker who initiated the complaint. In a similar 
vein, AILA and ACIP argued that whether a provision is a penalty or 
liquidated damages should be inferred from the facts and circumstances 
of the case; thus the fact that a penalty is found in one case does not 
automatically mean all similar provisions are void. TCS asserted that 
the Department should adopt a rule that an employer cannot be held in 
violation of the ACWIA unless a State court first holds that an agreed 
damage provision is a penalty, and, that even where a State court so 
holds, the Department should not find an employer in violation unless 
it fails to cure the violation within a reasonable amount of time.
    TCS also objected to any required notice to employees that would 
suggest that an employer's ability to enforce a damages provision 
contained in the employment contract is limited, expressing concern 
that such notification would encourage H-1B workers to disregard their 
contractual obligations. AILA encouraged the Department to avoid a 
presumption that any ``agreed damage'' is an unenforceable penalty. 
ACIP objected to the Department's statement that it would examine 
``attempts by employers to collect damages where their violations of 
the INA [the H-1B program], or other employment law may have caused the 
H-1B worker to cease employment''--apparently viewing this statement as 
suggesting that employers might contrive to get workers to quit their 
employment in order to collect contract damages.
    Notwithstanding the Department's continued reluctance to identify 
and interpret State law, the Department now concurs with the view that 
Congress intended the Department to determine whether a provision is 
liquidated damages or a penalty. For the same reason, it believes there 
is no merit to the suggestion by TCS that the Department cannot find 
that an employer has violated the ACWIA's bar against punitive damages, 
unless a State court first rules that a violation has occurred. 
Furthermore, the Department agrees that it is unnecessary to obtain a 
court judgment or a ruling from the Department of Labor if an employee 
pays voluntarily or the matter is settled. The Interim Final Rule 
reflects the Department's revised position on this question.
    Under the Interim Final Rule, a complaint regarding an alleged 
attempt to enforce a penalty provision will be processed and 
investigated in the same way as other complaints by aggrieved parties 
under Subparts H and I. Thus, an individual who believes that an 
employer has sought to enforce a penalty provision should file a 
complaint with the Wage and Hour Administrator. After investigation, 
Wage and Hour will issue a determination in accordance with its 
analysis of the relevant State law, and, where violations are found, 
may assess a civil money penalty of $1,000 for each violation and order 
the return of any money paid by the worker(s) to the employer (or, if 
the worker(s) cannot be located, to the U.S. Treasury). A party 
aggrieved by Wage and Hour's determination may request a hearing before 
an ALJ; a party may obtain review of the ALJ's determination by the 
Department's Administrative Review Board.
    The Department agrees with the suggestion that the regulations 
contain some of the general principles applied in resolving whether a 
provision is a permissible liquidated damages provision or an 
impermissible penalty. It is drawn primarily from two legal reference 
publications (American Jurisprudence 2d; Restatement (Second) 
Contracts) that provide a general discussion regarding the differences 
between liquidated damage and penalty provisions. However, the 
decisional and statutory law of a particular State, as applied to the 
particular circumstances relating to the employment and contract at 
issue--not these general principles--will control the resolution of 
most disputes. Furthermore, we do not address other legal remedies that 
may be available to the parties to recover damages for an alleged 
breach of the employment agreement--matters outside the Department's 
charge under the ACWIA. Individual State law also will determine the 
particular state whose law will apply to the dispute, where significant 
aspects of the contract and employment relationship involve different 
States (or nations).
    The Department has also incorporated into the Interim Final Rule 
its proposal to examine attempts by employers to collect damages where 
violations of employment law may have caused the H-1B worker's 
premature termination of his or her employment. It is the Department's 
expectation that where there is a constructive discharge, or the 
employer has committed substantive violations of the H-1B provisions 
directly impacting on the employee (such as wage and benefit 
violations), State law would not permit the employer to collect the 
payment.
    The Department reiterates the point it made in the NPRM that, 
although State law will govern the enforceability of liquidated damage 
provisions in agreements, an H-1B employer nevertheless must comply 
with the requirements of Federal statute and regulation bearing upon 
the H-1B employment relationship. For example, irrespective of any 
contractual agreement to the contrary, an employer is prohibited from 
directly or indirectly allocating any of the $500 LCA fee (recently 
increased to $1,000) or other employer expenses to the H-1B worker (see 
Section 212(n)(2)(C)(vi)(II)). Thus an employer is barred from directly 
withholding the $500 or $1,000 fee from the H-1B worker's pay or from 
indirectly collecting the fee through a liquidated damages provision in 
the contract. The Department agrees that

[[Page 80175]]

liquidated damages may encompass other costs the employer has borne on 
behalf of the employee, such as transportation and visa processing 
assistance. Employers should be aware that liquidated damages may be 
withheld from the required wage only if permitted under the criteria 
for allowable deductions at 20 CFR 655.731(c)(7).
    With regard to the suggestion that the Department issue a rule 
limiting the relief available to the particular worker rather than 
allowing a particular determination to affect other cases or other 
workers, the Department will apply principles of administrative 
collateral estoppel (the legal principle limiting consideration of a 
dispute to only one court action), where appropriate, just as it would 
for any other employment law violation.
    The Department sees no merit to the proposal by TCS that an 
employer may be held in violation of the ACWIA' s punitive damages bar 
only where it fails to cure the violation within a reasonable time 
after a determination that an agreed damages provision is an 
unenforceable penalty. There is nothing in the language of the statute 
to suggest that penalties under this provision should be assessed 
differently than penalties under other provisions.

K. What Standards Apply To Determine If an Employer Received a 
Prohibited Kickback of the Additional $500/$1,000 Petition Filing Fee 
From an H-1B Worker? (Sec. 655.731(c)(10)(ii))

    The ACWIA prohibits an employer from ``requir[ing] an alien who is 
the subject of a [visa] petition * * * for which a fee is imposed under 
section 214(c)(9), to reimburse, or otherwise compensate, the employer 
for part or all of the cost of such fee. It is a violation for such an 
employer otherwise to accept such reimbursement or compensation from 
such an alien.'' The referenced filing fee is the ACWIA-enacted filing 
fee applicable to H-1B petitions, which is in addition to any other 
fees imposed by INS for filing H-1B petitions. The fee was created by 
the ACWIA, in the amount of $500; the October 2000 Amendments increased 
the fee to $1,000. The H-1B worker is not, in any manner, to pay or 
absorb the cost of any of the additional fee.
    Senator Abraham explained that new clause (vi)(II) ``prohibits 
employers from requiring H-1B workers to reimburse or otherwise 
compensate employers for the new fee imposed under new section 
214(c)(9), or to accept such reimbursement or compensation.'' 144 Cong. 
Rec. S12752 (Oct. 21, 1998); see also, 144 Cong. Rec. E2325 (Nov. 12, 
1998). Congressman Smith explained that ``Congress included this 
provision to make it very clear that these fees are to be borne by the 
employer, not passed on to the workers.'' Id.
    The proposed rule stated that the employee is not to be forced, 
encouraged, or permitted to rebate any part of the filing fee to the 
employer, directly or indirectly, e.g., through an intermediary such as 
an attorney, relative, or co-worker.
    The Department received three comments on this issue. All the 
commenters agreed that the statute prohibits employers from accepting 
reimbursement from the H-1B worker for the filing fee.
    AILA asserted that not all third-party reimbursements are 
prohibited (e.g., joint employment arrangements, cooperative or joint 
ventures). The Department agrees that the statute does not prohibit 
payment of the filing fee by a third party, nor does it require payment 
only from the employer. However, the Interim Final Rule does prohibit 
third-party payment if the third party receives or asks for 
reimbursement from the alien. The employer is held accountable even if 
it is a third party which violates the statute.
    The AFL-CIO asserted that the Department should state specifically 
that deductions from the alien's wages will be scrutinized to prevent 
subterfuge for repayment of the filing fee. The Department intends to 
be alert to abuse or subterfuge. The Interim Final Rule makes it clear 
that deductions to cover the fee are not allowed, even if the H-1B 
worker's pay is higher than the required wage.
    A third commenter (ITAA) contended that the Department does not 
have the authority to prohibit the alien from paying the expenses other 
than the filing fee. This issue regarding other expenses is discussed 
at Sec. 655.731(c)(7) and Section P.3 of the NPRM, concerning allowable 
deductions from the required wage.
    The Department has determined that the NPRM properly implements the 
statutory mandate that the employer not force, encourage, or permit an 
employee to rebate any part of the fee back to the employer or a third 
party, directly or indirectly, including payments through an 
intermediary such as an attorney, relative or co-worker. The Interim 
Final Rule, therefore, embodies the proposed rule. In addition, the 
Interim Final Rule takes into account the increased petition filing 
fee, enacted by the October 2000 Amendments. The Rule prescribes that 
for H-1B nonimmigrants admitted on petitions filed prior to December 
18, 2000, the fee ``kickback'' prohibited by this statutory provision 
is $500 (the amount of the filing fee as created by ACWIA), and that 
for nonimmigrants admitted on petitions filed on or subsequent to 
December 18, 2000, the prohibited fee ``kickback'' is $1,000 (the 
increased fee enacted by the October 2000 Amendments). In the event of 
an investigation, the Administrator will determine the amount of the 
statutorily-prohibited ``kickback,'' based on the filing date of the 
petition.

L. What Penalties and Remedies Apply If the Employer Imposes an 
Impermissible Penalty or Receives an Impermissible Rebate? 
(Sec. 655.810)

    The ACWIA enforcement provision on early termination penalties and 
filing fee kickbacks is self-contained and provides its own sanctions 
authority. The Department may impose a civil monetary penalty of $1,000 
for each violation, whether willful or non-willful, and may order the 
employer to reimburse the worker (or the Treasury, if the worker cannot 
be located) for any such payment. The ACWIA provision does not 
authorize debarment for the penalty and kickback violations.
    The Department proposed to adopt the ACWIA language verbatim. Three 
commenters (ACIP, AILA, TCS) encouraged an express provision 
prohibiting any class-based relief or res judicata effect and limiting 
an administrative finding of penalty and corresponding remedy to the 
particular H-1B worker for whom the violation was found. As discussed 
in IV.J, above, the Department will follow traditional principles of 
administrative collateral estoppel, if applicable, as it does under 
other employment laws.
    The Interim Final Rule adopts the statutory language without 
further elaboration.

M. How Did the ACWIA Change DOL's Enforcement of the H-1B Provisions? 
(Subpart I)

    Section 212(n)(2) of the INA as amended by the ACWIA provides 
specific authority to undertake ``random'' investigations of employers 
found to have previously violated their H-1B obligations and to 
undertake investigations of employers, in limited circumstances, based 
on information received from other sources that otherwise would be 
unable to submit complaints as aggrieved parties. The ACWIA also 
provides explicit employee whistleblower protections and enhanced 
monetary and debarment sanctions against employers who willfully 
violate H-1B requirements. The Department proposed to modify Subpart I 
of the current regulations to

[[Page 80176]]

reflect these additional provisions, integrating them into the existing 
regulatory scheme.
1. What Changes Has the ACWIA Made in the DOL's Enforcement Based on 
Complaints From ``Aggrieved Parties''? (Sec. 655.715)
    Section 212(n)(2) of the INA as amended by the ACWIA, states that 
``nothing in this subsection shall be construed as superseding or 
preempting any other enforcement-related authority under this Act * * 
*'' Senator Abraham and Congressman Smith both explained that this 
provision ``clarifies that none of the enforcement authorities granted 
in subsection 212(n)(2) as amended should be construed to supersede or 
preempt other enforcement-related authorities the Secretary of Labor or 
the Attorney General may have under the Immigration and Nationality Act 
or any other law.'' 144 Cong. Rec. S12755 (Oct. 21, 1998); 144 Cong. 
Rec. E2329 (Nov. 12, 1998). For this reason, and because the ACWIA did 
not by its terms purport to amend the Secretary's authority to 
investigate based upon complaints from an ``aggrieved party'' or the 
Secretary's regulations defining ``aggrieved party,'' the Department 
proposed no changes to the existing regulation defining ``aggrieved 
party'' at Sec. 655.715. Accordingly, any changes to those regulations 
would be outside of the scope of this rulemaking.
    Two comments were received regarding the issue of ``aggrieved 
party.''
    AILA asserted that a fair reading of ACWIA suggests that 
governmental entities other than DOL should be removed from the current 
regulatory definition of aggrieved party and should instead present 
``other source'' claims. The U.S. Department of State stated that 
requiring the Department of State to submit information only as an 
``outside source,'' with the compelling standard required by section 
212(n)(2)(G), discussed below, would be a mistake, as it could limit 
the effect of what could be an excellent source of information, and 
would therefore be detrimental to the effectiveness of the H-1B 
category.
    The Department has consistently defined ``aggrieved party'' to 
include ``a government agency which has a program that is impacted by 
the employer's alleged non-compliance with the [LCA].'' 20 CFR 655.715. 
The State Department is an aggrieved party, for example, because its 
mission is adversely affected if H-1B petitions are erroneously 
granted. Because of the responsibility of consular officers to reject 
visa applications of anyone the officer ``knows or has reason to 
believe * * * is ineligible to receive a visa'' (8 U.S.C. 1201(g); 22 
CFR 41.121(a)), the State Department would be required to expend its 
own investigative resources to ferret out illegal practices visa by 
visa if it did not provide information to the Administrator. Similarly, 
the State Department is required to withhold the granting of a visa and 
exclude the alien from the U.S. if it determines that the alien will 
become a public charge (8 U.S.C. 1182(a)(4); 22 CFR 40.41)--a 
possibility that increases significantly if an employer fails to pay 
its H-1B worker the required wage. Many of these violations would 
otherwise go undetected because of the inclination of H-1B workers and 
their employers to hide such matters from INS and the Labor Department.
    Therefore the Department has made no change in the definition of 
``aggrieved party.'' However, the Department will not consider 
information contained on the LCA or associated petition(s), including 
the documentation supporting the petition, to be the sole basis of a 
complaint under section 212(n)(2)(A) while section 212(n)(2)(G) remains 
in effect.
2. What Procedures Does the ACWIA Provide for Random Investigations? 
(Sec. 655.808)
    Section 212(n)(2)(F) of the INA as amended by the ACWIA authorizes 
random investigations of employers found by the Secretary, after the 
ACWIA's enactment on October 21, 1998, to have committed a willful 
failure to meet an LCA condition or a willful misrepresentation of 
material fact on an LCA. The statute authorizes such random 
investigations over a period of five years, beginning on the date of 
the willful violation finding. The same special scrutiny exists where 
an H-1B-dependent employer or willful violator is found by the Attorney 
General to have willfully failed to meet its obligation under section 
212(n)(1)(G)(i)(II) to offer a job to an ``equally or better 
qualified'' U.S. worker. The requirements of section 212(n)(2)(A) 
regarding investigation of complaints are not applicable to these 
random investigations.
    Senator Abraham observed that this provision adds a new section 
212(n)(2)(F) granting the Secretary authority to conduct random 
investigations of employers found after enactment of this act to have 
committed a willful violation or willful misrepresentation for five 
years following the finding. 144 Cong. Rec. S12754 (Oct. 21, 1998). 
Congressman Smith explained that this authority is ``in addition to the 
existing investigative authority in section 212(n)(2)(A), as heretofore 
exercised by the Secretary.'' 144 Cong. Rec. E2327 (Nov. 12, 1998).
    The Department proposed that the date of the willful violation 
``finding'' (which invokes the ``random investigation'' authority) 
would be the date of the agency's final determination of a violation 
for debarment purposes. 20 CFR 655.855(a); 59 FR 656757 (Preamble to 
the Final Rule). Although the NPRM proposed this interpretation, the 
Department sought comment on whether an earlier date, such as that of 
the Administrator's investigation finding or an ALJ's finding would be 
appropriate.
    Three comments were received relating to the proposed regulation on 
random investigation authority.
    IEEE expressed strong support for the new random enforcement 
provision in ACWIA and recommended that the regulations not be written 
or interpreted so strictly as to effectively prevent the Department 
from exercising this authority. Malyankar suggested directly surveying 
H-1B workers themselves at short intervals to determine how the program 
is being used and to detect possible abuses.
    AILA responded that only final action finding a willful violation 
or willful misrepresentation should trigger its authority to conduct 
random investigations.
    The Interim Final Rule, consistent with the AILA suggestion and the 
manner in which the current regulations address other Secretarial 
``findings,'' states that a willful violation ``finding'' within the 
meaning of the statutory provision occurs when the administrative 
review process is completed, as described in Sec. 655.855(b) of the 
regulations.
3. What Procedure Does the ACWIA Provide for Investigation Arising From 
Sources Other Than Aggrieved Parties? (Sec. 655.807)
    Section 212(n)(2)(G) of the INA as amended by the ACWIA authorizes 
the Secretary to investigate possible violations based on information 
provided to the Department by sources other than aggrieved parties. The 
Department may, upon personal certification by the Secretary, undertake 
an investigation under this authority when it receives specific 
credible information that provides reasonable cause to believe that a 
particular type of violation has occurred. The types of violations 
covered are: A willful failure to meet statutory conditions relating to 
wages, working conditions, a strike/lockout, and the displacement and 
recruitment provisions applicable to dependent employers and willful

[[Page 80177]]

violators. In addition, such an investigation may be undertaken where 
the information provides reasonable cause to believe that the employer 
has engaged in a pattern or practice of failures to meet any of these 
conditions; or a substantial failure to meet such a condition that 
affects multiple employees. The Department is also charged with 
developing a form for receiving information on these potential 
violations. The ACWIA specified that this provision would be effective 
until September 30, 2001; the October 2000 Amendments extended the 
effective period to September 30, 2003.
    The ACWIA limits the source who may provide information under this 
provision to a known source who is likely to have knowledge of the 
employer's practices, and specifically excludes information provided to 
the Secretary or to the Attorney General for purposes of securing 
employment of a nonimmigrant. However, the Secretary is authorized to 
commence an investigation under this provision if the information was 
obtained by the Secretary in the course of an investigation under the 
INA or any other Act.
    To allow employers to respond to the allegations before an 
investigation is commenced, the ACWIA provides that the Secretary shall 
ordinarily provide notice to the employer concerning the allegations. 
However, the Secretary is authorized to withhold the source's identity 
and is not required to provide this notice if the Secretary determines 
it would interfere with efforts to secure compliance with the 
requirements of the H-1B program.
    In explaining the purpose and effect of this provision, Senator 
Abraham stated:

    Subsection 413(e) grants the Secretary limited additional 
authority with respect to other employers to investigate certain 
kinds of allegations of failures to comply with labor condition 
attestations. The Secretary's authority under current law is limited 
to investigating complaints concerning such violations that come 
from aggrieved parties. * * * The rationale for this grant of 
authority is to make sure that if DOL receives specific, credible 
information from someone outside the DOL that an employer is doing 
something seriously wrong but that information comes from someone 
who is not an aggrieved party, DOL can nevertheless pursue the lead. 
* * *. Thus, this provision does not authorize `self-directed' or 
`self-initiated' investigations by the Secretary.

144 Cong. Rec. S12754 (Oct. 21, 1998). In contrast, Congressman Smith 
stated:

    Subsection 413(e) specifies a particular investigative process, 
to be used by the Secretary during the three-year period following 
enactment of this legislation. This process does not supplant or 
curtail the Secretary's existing authority in paragraph (2)(A) and 
does not affect the Secretary's newly-created authority under 
paragraph (2)(F) (`random investigations')* * *. This provision does 
not address the matter of ``self-directed'' or ``self-initiated'' 
investigations by the Secretary. * * * Congress' intent in enacting 
this special enforcement process was to endorse the Secretary's 
efforts to be more vigilant and effective in the enforcement of this 
Act, especially given the authorization of a substantial increase in 
temporary foreign workers.

144 Cong. Rec. E2327 (Nov. 12, 1998).
    The Department proposed regulatory language to integrate this 
``other source'' protocol with the Department's other enforcement 
procedures in a new Sec. 655.806. The Department additionally noted in 
the NPRM that it was developing a form to be used in receiving 
information from ``other sources'' that would be published for public 
comment.
    Eight comments were received regarding this provision.
    Three organizations representing employees (AFL-CIO, AOTA, IEEE) 
supported these provisions as essential to careful monitoring of the 
program. IEEE stated its view that it is important that the regulations 
not be written or interpreted so restrictively as to effectively 
prevent the Department from exercising this authority. The AFL-CIO 
commented that the ``integrated procedures'' for handling complaints 
from other sources will make it easier for workers and job applicants 
to follow the status of the complaint and ensure that the Department 
examines complaints against an employer in full.
    AILA commented that Congress, in providing DOL with the new other 
source enforcement authority, ``repudiated and eliminated the so-called 
`self directed' authority to initiate investigations.''
    The Department has long believed that directed (no complaint) 
investigations are appropriate where the Department becomes aware of a 
possible H-1B violation, whether in the course of an investigation of 
another employer, an investigation under another statute, or as the 
result of the receipt of information from some other source. To do 
otherwise would place Department staff in the untenable position of 
being forced to ignore knowledge of potentially serious H-1B violations 
secured in performance of their official duties, and would be a 
departure from the Department's practice under the H-1A nonimmigrant 
nurses program. The Department is also of the view that directed 
investigation authority is not precluded by the Act.
    However, the Department also believes that the explicit provisions 
of the ACWIA concerning random investigations of willful violators and 
investigations based on credible information from sources other than 
aggrieved parties allow it to conduct ``directed'' investigations in 
virtually all situations in which it might have done in the past. 
Consequently, at least through September 30, 2003 (the date the ``other 
source'' investigation authority sunsets), it is the Department's 
intention to conduct only investigations pursuant to complaints from 
aggrieved parties, investigations based on information from sources 
other than aggrieved parties (including information obtained by the 
Secretary during an investigation under the INA or any other Act), and 
random investigations of willful violators.
    AILA also requested that the Department define the terms 
``substantial'' and ``pattern and practice.''
    In the Department's view, it is unnecessary to define these terms 
in the regulations. The concept of a ``substantial'' violation, like 
``willful'' violation, has been in the statute since enactment of MTINA 
in 1991. Furthermore, ``pattern and practice'' is a recognized concept 
in employment law which requires no definition. Finally, the 
determination of whether there is reason to believe there is a pattern 
or practice of failures or a substantial failure to meet a condition 
that affects multiple employees are determinations that are necessarily 
fact-specific, based upon the facts and circumstances of a particular 
case.
    ACIP suggested that employers should be notified of receipt of 
complaints within 48 hours of receipt, and that a decision not to 
notify the employer should be a rare occurrence, happening only if the 
Department possesses clear evidence that the employer is likely to 
impede the investigation.
    The Department anticipates that a decision not to notify an 
employer of the substance of allegations against it is likely to be a 
rare occurrence. It is also the Department's experience that many 
employers quickly remedy violations when brought to their attention. 
However, the Department does not believe it is appropriate to specify 
the time period in which notification will occur, or to delineate a 
standard in the regulations.
    Kirkpatrick & Lockhart and Latour expressed their views that 
investigations should be initiated only on information from injured 
parties, while acknowledging that the scope of the provision goes 
beyond

[[Page 80178]]

``whistleblowers.'' The firms expressed particular concern about 
competitor complaints.
    Contrary to the views expressed by Kirkpatrick & Lockhart and 
Latour, the Department is of the view that the ``other source'' 
provision of the ACWIA was intended to extend to any source likely to 
have knowledge of the employer's practices or employment conditions, or 
of an employer's compliance with its attestation obligations. 
Furthermore, the Department has long considered a competitor to be an 
``aggrieved party,'' as defined in its current regulations at 
Sec. 655.715.
    ITAA noted that the proposed regulations correctly state that the 
``other source'' provisions expire on September 30, 2001, unless 
continued by future legislation, and suggested that the regulations 
should also identify other provisions that will ``sunset'' absent 
further action by Congress. The point is well taken. The Department 
notes that Congress in the October 2000 Amendments has, in fact, 
extended the effective periods for this and other provisions until 
2003. The Interim Final Rule identifies the provisions that will expire 
on particular dates, absent their extension by future legislation.
    AILA requested the opportunity to review and comment on the form 
that is being developed to receive ``other source'' information. One 
commenter (BRI) asserts that Department employees should not be allowed 
to complete forms on behalf of a ``source,'' suggesting that the 
Department's involvement might have a coercive effect.
    The Department has attached its proposed form to this rule in order 
to obtain the views of the public, as required by the Paperwork 
Reduction Act. The Department notes that for the convenience of the 
public and of the Department, it has designed one form for use both by 
aggrieved parties and by other sources. This will allow the Department 
to make a determination as to whether the source is aggrieved, and if 
not, whether the statutory standard is met, after review of the 
information submitted. The Department disagrees with the comment by 
BRI, noting that the ``other source'' procedure is initiated by the 
individual who has submitted information to the Department--not vice-
versa--and that the ACWIA expressly authorizes the Department to 
complete the form on behalf of the individual.
    The Department has made other procedural changes. Sections 
655.800(b), 655.806(a), and 655.807(b) of the Interim Final Rule 
provide that the Administrator may interview the complainant or other 
person supplying information to determine whether the statutory 
standards are met. (As a courtesy, the Administrator will notify the 
person providing the information if the standards have not been met, or 
if, after the determination by the Secretary, an investigation will be 
conducted.)
    The section has been restructured, in accordance with the 
Department's reading of the statute, to provide that the employer will 
ordinarily be provided information regarding the allegations and given 
an opportunity to respond after the Administrator has made an initial 
determination that the statutory standards are met, rather than prior 
to this determination. The Administrator will then review this 
information in order to determine if the allegations should be referred 
to the Secretary for a determination as to whether an investigation 
should be commenced. Where the Administrator has determined that 
notification to the employer should be dispensed with, the Secretary 
will be advised in the referral; there will be no review of this 
determination other than by the Secretary.
    Section 655.806(a)(3) (and the corresponding provision in 
Sec. 655.807(i)) is clarified based on the Department's enforcement 
experience to provide that the time to conduct an investigation may be 
increased where, for reasons outside of the control of the 
Administrator, additional time is necessary to obtain information from 
the employer or other sources to determine if a violation has occurred. 
It has been the Department's experience that employers do not always 
timely provide requested information; in other circumstances Wage-Hour 
must obtain documentation from other agencies, such as information from 
INS regarding petitions filed (especially where employers have not 
provided requested information or where needed to verify information 
supplied by employers).
4. What Protections Are Provided to Whistleblowers by the ACWIA? 
(Sec. 655.801)
    Section 212(n)(2)(C)(iv) of the INA as amended by the ACWIA 
provides explicit protection for H-1B employees who exercise their H-1B 
rights by complaining about a violation of the Act or cooperating with 
an investigation. An employer may not ``intimidate, threaten, restrain, 
coerce, blacklist, discharge, or in any other manner discriminate 
against [such] employee.'' ``Employee'' is defined to include former 
employees and applicants for employment. Like other whistleblower 
statutes, the ACWIA provision protects an employee's ``internal'' 
complaint to the employer or to any other person, as well as an 
employee who cooperates in an investigation or proceeding concerning an 
employer's compliance with the Act and these regulations. As Senator 
Abraham stated, this provision ``essentially codifies current 
Department of Labor regulations concerning whistleblowers.'' 144 Cong. 
Rec. S12752 (Oct. 21, 1998).
    Section 212(n)(2)(C)(vi) directs the Department and the Attorney 
General to establish a process to enable an H-1B worker who files a 
whistleblower complaint to remain in the United States and seek other 
appropriate employment for a period not to exceed the maximum period 
provided for the H-1B classification. As noted in the NPRM, the 
Department and the INS are working in close cooperation to develop this 
process. This mechanism, however, is not within the scope of this 
rulemaking.
    The whistleblower enforcement provision elicited five comments.
    APTA, AOTA, and IEEE expressed strong support for the statute's 
whistleblower provisions.
    AILA suggested that the ACWIA's anti-retaliation language 
protecting an employee from retaliation where the employee has 
disclosed information that the employee ``reasonably believes evidences 
a violation'' of the H-1B provisions covers only ``genuine infractions 
of law.'' It therefore suggested that the Department should amend its 
rule to make clear that the disclosure ``must be other than a de 
minimis violation.''
    The Department rejects this interpretation. The Department is of 
the view that Congress intended that the Department, in interpreting 
and applying this provision, should be guided by the well-developed 
principles that have arisen under the various whistleblower protection 
statutes that have been administered by this Department (see 29 CFR 
part 24). The Department also believes that, as in those programs, the 
parameters of the provision are best developed through adjudication 
rather than through rulemaking. The Department points out that the 
statutory test is whether the employer has discriminated against an 
employee because the employee disclosed information the employee 
reasonably believed evidenced a violation, or because the employee 
cooperated or sought to cooperate in an investigation or other 
proceeding. The Department believes that there is no basis for 
inferring an intention to protect only complaints of actual infractions 
of

[[Page 80179]]

law, or to exclude potential de minimis violations.
    BRI commented that the employer should not be liable for wrongful 
termination until found guilty by the appropriate authority. The 
Department agrees that an employer is not liable for wrongful 
termination until a final decision is issued in a Department of Labor 
proceeding.
5. What Changes Does the ACWIA Make in Enforcement Remedies and 
Penalties? (Sec. 655.810)
    Prior to the ACWIA's enactment, the INA authorized the assessment 
of a civil money penalty (up to $1,000 per violation) and debarment 
from the sponsorship of nonimmigrant aliens for employment (at least 
one year), among other unspecified remedies, for H-1B violations. In 
place of this ``unitary'' scheme, section 212(n)(2)(C)(i)-(iii) of the 
INA as amended by the ACWIA established a three-tier scheme for 
sanctions and remedies, depending upon the nature and severity of the 
violations. The first tier provides for up to $1,000 per violation and 
debarment for at least one year (for violations of the attestation 
provisions regarding a strike or lockout, or the dependent employer/
willful violator provisions regarding displacement; or for substantial 
violation of the attestation provisions regarding notice, the details 
of the attestation, or the dependent employer/willful violator 
provisions regarding recruitment). The second tier provides for up to 
$5,000 per violation and debarment for at least two years (for willful 
violations of any of the attestation provisions, willful 
misrepresentation, or violation of the whistleblower provisions). The 
third tier provides for up to $35,000 and debarment for at least three 
years (for willful violations of any of the attestation provisions or 
willful misrepresentation, in the course of which violation or 
misrepresentation the employer displaced a U.S. worker within the 
period beginning 90 days before and ending 90 days after the filing of 
an H-1B petition supported by the LCA). In each of the three penalty 
tiers, as in the previous statutory provision, the ACWIA authorizes the 
imposition of ``such other administrative remedies as the Secretary 
determines to be appropriate.''
    In explaining new clause (iii), Senator Abraham explained:

    The rationale for this new penalty is that there have been 
expressions of concern that employers are bringing in H-1B workers 
to replace more expensive U.S. workers whom they are laying off. 
Current law, however, requires employers to pay the higher of the 
prevailing or the actual wage to an H-1B worker. Thus, the only way 
an employer could profitably be systematically doing what has been 
suggested is by willfully violating this obligation. Otherwise, the 
employer would have no economic reason for preferring an H-1B worker 
to a U.S. worker as a potential replacement. Thus, the new penalty 
set out in new clause (iii) is designed to assure that there are 
adequate sanctions for (and hence adequate deterrence against) 
[willful violations of the wage provisions] by imposing a severe 
penalty on a willful violation of the existing wage-payment 
requirements in the course of which an employer `displaces' a U.S. 
worker with an H-1B worker.
    At the same time, Congress chose not to make the layoff itself a 
violation. The reason for this is that there are many reasons 
completely unconnected to the hiring of H-1B workers why an employer 
may decide to lay off U.S. workers. * * * Accordingly, it is 
important to understand that unlike the new attestation requirements 
imposed by the amendments to section 212(n)(1), clause (iii) of 
section 212(n)(2)(C) provides no new independent basis for DOL to 
investigate an employer's layoff decisions. The only point at which 
DOL can do so pursuant to clause (iii) is after it has already found 
that the employer has committed a willful violation of one of the 
pre-existing labor condition attestations.
    * * * At that point, and not before, provided that there is 
reasonable cause to believe that an employer had also displaced a 
U.S. worker in the course of committing that violation, it would be 
proper for DOL to investigate, but only in order to ascertain what 
penalty should be imposed. The definitions concerning 
``displacement'' and the like, set out in new 212(n)(3) and 
212(n)(4) of the Immigration and Nationality Act, and discussed in 
the previous portion of this section-by-section analysis dealing 
with the amendments to that Act made by section 412 of this 
legislation, apply in this context as well.

144 Cong. Rec. S12752 (Oct. 21, 1998).
    Congressman Smith explained that new clause (iii) ``clarifies that 
certain kinds of employer conduct constitute a violation of the 
prevailing wage attestation, and that other kinds of employer conduct 
are also prohibited in the H-1B program. * * * Congress intends that 
this new penalty will assure that there are adequate sanctions for (and 
hence adequate deterrence against) any willful violation of the 
existing wage-payment requirements in the course of which an employer 
`displaces' an American worker with an H-1B worker.'' 144 Cong. Rec. 
E2325 (Nov. 12, 1998).
    These penalty provisions do not apply to the ACWIA prohibitions on 
penalizing an H-1B worker for his or her early cessation of employment, 
or on requiring an H-1B worker to reimburse the filing fee. For these 
violations, the Department, instead, may impose a civil money penalty 
of $1,000 for each violation and reimbursement of the H-1B worker (or 
the Treasury if the worker cannot be located). Debarment is not 
available as a sanction for these violations.
    In the NPRM, the Department proposed that ``appropriate 
administrative remedies'' would include the imposition of curative 
actions such as providing notice to workers and affording ``make-
whole'' relief for displaced workers, whistleblowers, or H-1B workers 
who failed to receive proper benefits or eligibility for benefits.
    Senator Abraham and Congressman Smith had divergent views regarding 
the Secretary's authority to impose such remedies. Senator Abraham 
stated that these remedies ``do not include an order to an employer to 
hire, reinstate, or give back pay to a U.S. worker as a result of any 
violation an employer may commit.'' 144 Cong. Rec. S12752 (Oct. 21, 
1998). Congressman Smith, on the other hand, stated that ``Congress 
intends that such remedies will include `make-whole' relief for 
affected American workers (such as, in appropriate circumstances, 
monetary compensation to the American worker or reinstatement to the 
job from which the American worker was dismissed or placement in the 
job to which the American worker should have been hired).'' 144 Cong. 
Rec. E2325 (Nov. 12, 1998).
    Several commenters (Senators Abraham and Graham, AILA, Network 
Appliance, Rubin & Dornbaum, Satyam, and White Consolidated Industries) 
stated that the authority to seek make-whole relief has never been 
asserted by the Department and is beyond the authority granted to the 
Department by the ACWIA. Other Congressional commenters commented that 
the proposed regulations on the scope of administrative remedies go far 
beyond what the statute contemplates, without specifically referring to 
make-whole relief.
    After careful consideration, the Secretary remains persuaded that 
the plain language of the ACWIA (``the Secretary * * * may * * * impose 
such other administrative remedies * * * as the Secretary determines to 
be appropriate'') provides the Secretary the authority to award 
whatever relief is appropriate in the circumstances of a case, 
including make-whole relief. Since the Act already contains explicit 
authority for civil money penalties, back wages, and debarment, it 
seems apparent that Congress intended to allow the Secretary to order 
other appropriate remedies to cure the violations. In the case of 
displacement

[[Page 80180]]

or whistleblower violations in particular, such relief must logically 
include reinstatement and back pay. Nor does the Department believe 
that the fact that explicit language concerning such relief was not 
contained in the ACWIA, as Senator Abraham indicates was sought by the 
Administration, equates to an express legislative denial of such 
remedial authority to the Secretary.
    ITAA, ACIP, and Intel requested that the Department define the 
various terms used in the statute's three-tier scheme for violations.
    The Department notes that ``willful failure'' is currently defined 
in the regulations at Sec. 655.805(b). As discussed above, it is the 
Department's view that it is unnecessary to define these terms further 
in the regulations.
    SBSC sought assurances that ``punitive approaches'' would not be 
applied where there is an absence of negligence, fraud, or other 
blameworthy action. Intel and ACIP suggest that the Department should 
recognize, in effect, a good faith defense for an employer that is 
found in violation of the statute. Intel suggests that the Department 
should establish a practice akin to that provided for I-9 violations by 
8 U.S.C. 1324a(b)(6). This provision stipulates that under certain 
circumstances ``a person is considered to have complied with a 
requirement of this subsection notwithstanding a technical or 
procedural failure to meet such requirement if there was a good faith 
attempt to comply with this requirement.''
    In the Department's view, the ACWIA does not provide a general 
defense in the nature of those suggested by SBSC and Intel. Entirely 
missing from the statute is any provision comparable to 8 U.S.C. 
1324a(b)(6). At the same time, however, it should be noted that the 
Department is vested with some enforcement discretion and intends to 
exercise this discretion in accordance with the purposes served by the 
statute and the public interest. Where appropriate, the Department will 
consider the totality of the circumstances, including an employer's 
demonstrated good faith attempts at compliance, in fashioning remedies 
appropriate to the violation. In this regard, the Department notes that 
its regulations providing the factors to be considered in assessing the 
amount of civil money penalties include an employer's good faith 
efforts to comply, the gravity of the violations, and the violator's 
explanation of the violations. See Sec. 655.810(c) of the current 
regulations.
    Several individuals urged the imposition of heavy penalties upon 
violators. The AFL-CIO suggested in particular that the Department 
should make greater use of the debarment penalty in cases that are 
resolved through consent judgments or other means of settlement.
    The Department, of course, will be guided by the penalty scheme 
established by Congress and the Department's regulatory provisions 
governing debarment and the assessment of penalties. The ACWIA 
establishes a three-tier system for debarment and civil money 
penalties; the remedy in a particular case will depend upon the 
category of the violation involved and consideration of the regulatory 
factors, which may enhance or reduce a civil money penalty under the 
particular circumstances of the violation. The Department notes that 
the ACWIA particularly recognizes the gravity of willful violations, as 
demonstrated by the longer debarment period and authority to conduct 
random investigations. Accordingly, the Secretary will insist on 
debarment in appropriate cases.
    The individual commenters urged the Department to issue a 
regulation that informs American workers of their rights under the 
statute. ITAA also suggested that the regulations should address the 
Attorney General's role under the statute.
    The Interim Final Rule lays out the obligations of H-1B-dependent 
employers and willful violators, including the requirements--as laid 
out in Sections D and E of the NPRM--that they not displace workers, 
that they not place H-1B workers at worksites of other employers where 
U.S. workers are being displaced, that they recruit U.S. workers using 
industry-wide procedures, and that they offer the job to any U.S. 
worker who applies who is equally or more qualified than the H-1B 
workers. The rule also explains the provision for filing complaints 
with the Attorney General for violations of the hiring requirement. In 
addition, although there is no direct remedy for U.S. workers who are 
not employed by dependent employers or willful violators, they may file 
complaints with the Department.
    ITAA requested that the Department clarify enforcement regulations 
as they pertain to recruitment violations and specify that only H-1B-
dependent employers may be liable for such violations. The Interim 
Final Rule has been clarified to make clear that only an H-1B-dependent 
employer or willful violator may be held liable for a recruitment 
violation. The recruitment obligations of dependent employers are 
discussed in much greater detail in IV.E, above.
    Finally, on review of the NPRM, the Department notes that it had 
misconstrued the scope of the third tier of penalties. The highest 
level of penalties (up to $35,000 per violation and a minimum of three 
years of debarment) are applicable whenever any employer displaces a 
U.S. worker in the course of committing a willful violation of any of 
the attestation provisions or a willful misrepresentation--regardless 
of whether the employer is a dependent employer or willful violator 
subject to the new attestation provisions of the ACWIA. In the 
Department's view this construction is clear from a careful reading of 
the statutory language, as well as the statement describing this 
provision by Senator Abraham, quoted above, at 144 Cong. Rec. S12752 
(Oct. 21, 1998). Application of this higher penalty will arise only 
where the Department determines that the employer has committed a 
willful violation of an attestation requirement--e.g., the employer has 
willfully failed to pay the required wage to H-1B workers. If the 
Department determines that the employer has displaced a U.S. worker 
within the period between 90 days before and 90 days after the LCA was 
filed, and that the employer has replaced that worker with an H-1B 
worker whom the employer has willfully failed to pay the required wage, 
the employer will be subject to a CMP of up to $35,000 per violation of 
the attestation requirements; in addition, the Department will advise 
INS, which shall not approve any petitions for at least a three-year 
period. The Interim Final Rule has been amended to correct this 
provision.
    In addition, the H-1B enforcement provisions contained in Subpart I 
of Part 655 have been restructured to make them clearer and more user-
friendly. Changes have also been made to comport with the Department's 
enforcement experience. Specifically, as discussed in IV.M.3, above, 
Sec. 655.806(a)(3) (and the corresponding provision in Sec. 655.807(i)) 
clarifies that the time to conduct an investigation may be increased 
where, for reasons outside of the control of the Administrator, 
additional time is necessary to obtain information from the employer or 
other sources to determine if a violation has occurred. Sections 
655.800(b), 655.806(a), and 655.807(b) provide that the Administrator 
may interview the complainant or other person supplying information to 
determine whether the statutory standards are met.

[[Page 80181]]

    Various clarifying changes have been made to proposed Sec. 655.810, 
setting forth the remedies available to the Administrator upon a 
finding of violations. As discussed in IV.G, above, the Department has 
determined that certain benefits are in the nature of compensation for 
services rendered, and have a monetary value to workers and monetary 
cost to employers. Therefore such benefits are more in the nature of 
wages than of working conditions. Paragraph (a) of Sec. 655.810 makes 
it clear that payment of unpaid benefits can be ordered by the 
Administrator pursuant to the Administrator's authority to order 
payment of back wages under section 212(n)(2)(D).
    In addition, the Interim Final Rule clarifies at 
Secs. 655.810(a)(14) and 655.810(a)(16) that the Department will issue 
CMP assessments for violations of the public access provisions of the 
Act, or for regulatory violations, such as a failure to cooperate in 
the investigation (see Sec. 655.800(c)). The Department will also 
assess CMPs for violations of the recordkeeping requirements, where the 
violation impedes either the ability of the Administrator to determine 
whether a violation of the H-1B requirements has occurred, or the 
ability of members of the public to have information needed to file a 
complaint or information regarding alleged violations of the Act. Under 
the existing regulations (Sec. 655.810(b)), CMP assessments may be 
imposed for any violations of the regulations.
    Finally, in conformance with the Federal Civil Penalties Inflation 
Adjustment Act of 1990, as amended (see 28 U.S.C. 2461 note), new 
Sec. 655.810(f) provides for inflationary adjustments to be made, by 
regulation, to civil money penalties in accordance with a specified 
cost-of-living formula. Such adjustments will be published in the 
Federal Register. The amount of the penalty in a particular case will 
be based on the penalty in effect at the time of the violation.

N. What Modification to Part 656 Does the ACWIA Provide for the 
Determination of the Prevailing Wage for Employees of ``Institutions of 
Higher Education,'' ``Related or Affiliated Nonprofit Entities,'' 
``Nonprofit Research Organizations,'' or ``Governmental Research 
Organizations''? (Sec. 655.731(a)(2), Sec. 656.40)

    The ACWIA amends the INA (Section 212(p)(1), 8 U.S.C. 1182(p)(1)) 
to require that the computation of the prevailing wage for employees of 
institutions of higher education, nonprofit entities related to or 
affiliated with such institutions, nonprofit research organizations, 
and Governmental research organizations only take into account the 
wages paid by such institutions and organizations in the area of 
employment. In addition, section 212(p)(1) provides that with respect 
to professional athletes as defined in section 212(a)(5)(A)(iii)(II), 
where the job opportunity is covered by professional sports league 
rules, the wage prescribed by those rules shall be considered the 
prevailing wage. This ACWIA directive concerning academic and research 
institutions affects both the H-1B program and the Permanent Labor 
Certification program, since both programs use the prevailing wage 
computation procedures set out in the Permanent program regulation at 
20 CFR 656.40. The provision regarding professional athletes affects 
only the Permanent program.
    On March 20, 1998 (63 FR 13756), the Department published a Final 
Rule amending its Permanent Labor Certification regulation to change 
the effects of the en banc decision of the Board of Alien Labor 
Certification Appeals in Hathaway Children's Services (91-INA-388, 
February 4, 1994), which required prevailing wages to be calculated by 
using wage data obtained by surveying across industries in the 
occupation in the area of intended employment. The 1998 Final Rule, in 
effect, allows prevailing wage determinations made for researchers 
employed by colleges and universities, Federally Funded Research and 
Development Centers (FFRDCs) operated by colleges and universities, and 
certain Federal research agencies to be made by using wage data 
collected only from those entities. The Department stated in the 
Preamble to that Final Rule that the amendment to the regulation also 
changed the way prevailing wages are determined for those entities 
filing H-1B labor condition applications on behalf of researchers, 
since the regulations governing the prevailing wage determinations for 
the Permanent program are followed by State Employment Security 
Agencies (SESAs) in determining prevailing wages for the H-1B program 
as well.
    The ACWIA provision goes considerably beyond the regulatory 
amendments made by the Department. The ACWIA provisions extend to all 
nonprofit research organizations and Governmental research 
organizations. In addition, the ACWIA provisions extend not only to 
researchers, but to all occupations in which institutions of higher 
education, nonprofit entities related to or affiliated with such 
institutions, and nonprofit research organizations or Governmental 
research organizations may want to employ H-1B workers or aliens 
immigrating for the purpose of employment.
    In describing the application of this provision, Senator Abraham 
stated in pertinent part:

    Paragraph 212(p)(1) provides that the prevailing wage level at 
institutions of higher education and nonprofit research institutes 
shall take into account only employees at such institutions. The 
provision separates the prevailing wage calculations between 
academic and research institutions and other non-profit entities and 
those for for-profit businesses. Higher education institutions and 
nonprofit research institutes conduct scientific research projects, 
for the benefit of the public and frequently with federal funds, and 
recruit highly-trained researchers with strong academic 
qualifications to carry out their important missions. The bill 
establishes in statute that wages for employees at colleges, 
universities, nonprofit research institutes must be calculated 
separately from industry.

144 Cong. Rec. S12756 (Oct. 21, 1998).
    The Department consulted with the INS on the definitional issues, 
since that agency has addressed similar issues with regard to the 
implementation of the additional fee required for petitions on behalf 
of H-1B nonimmigrants. The employers excluded from that fee are the 
same as the employers specified in the ACWIA provision concerning 
prevailing wage determinations. The Department worked with the INS in 
developing the following definitions contained in its Interim Final 
Rule published on November 30, 1998 (63 FR 65657), 8 CFR 
214.2(h)(19)(iii)(B):

    ``An institution of higher education, as defined in section 
801(a) of the Higher Education Act of 1965;
    ``An affiliated or related nonprofit entity. A nonprofit entity 
(including but not limited to hospitals and medical or research 
institutions) that is connected or associated with an institution of 
higher education, through shared ownership or control by the same 
board or federation, operated by an institution of higher education, 
or attached to an institution of higher education as a member, 
branch, cooperative, or subsidiary;
    ``A nonprofit research organization or Governmental research 
organization. A research organization that is either a nonprofit 
organization or entity that is primarily engaged in basic research 
and/or applied research, or a U.S. Government entity whose primary 
mission is the performance or promotion of basic and/or applied 
research. Basic research is research to gain more comprehensive 
knowledge or understanding of the subject under study, without 
specific applications in mind. Basic research is also research that 
advances scientific knowledge, but does not have specific immediate 
commercial objectives although it may be in fields of present or 
potential commercial

[[Page 80182]]

interest. Applied research is research to gain knowledge or 
understanding to determine the means by which a specific, recognized 
need may be met. Applied research includes investigations oriented 
to discovering new scientific knowledge that has specific commercial 
objectives with respect to products, processes, or services.''

    The INS Interim Final Rule also provides, in relevant part, that a 
nonprofit organization or entity is one that is qualified as a tax 
exempt organization under Section 501(c) (3), (4) or (6) of the 
Internal Revenue Code of 1986 (IRC) and has received approval as a tax 
exempt organization from the Internal Revenue Service, as it relates to 
research or educational purposes.
    In the NPRM, the Department sought comments on the proper 
definitions of the entities to which the ACWIA prevailing wage 
provisions apply. The Department shared these comments with INS in the 
development of definitions to apply to both the INS and Departmental 
regulations. Comments received by INS concerning these definitions have 
also been considered by the Department and are included in the record 
of this rule.
    In order to determine prevailing wages as required by the ACWIA, 
the Department explained that it is also necessary to determine the 
appropriate universe(s) to survey, and to determine the availability of 
relevant, reliable data. The Act sets forth the four types of 
organizations in two groups: educational institutions and related 
research organizations; and other nonprofit research organizations and 
Governmental research organizations. The Department stated, however, 
that the Act does not seem to require that prevailing wages be 
determined separately for those two groups, as distinguished from a 
universe consisting of all four groups, or surveys of the four types of 
organizations separately, or some other combination.
    The Department explained in the NPRM that it has reason to believe 
that it may not be feasible to identify the different kinds of entities 
that might comprise educational institutions' related or affiliated 
nonprofit entities, or nonprofit research organizations. If those 
entities cannot be identified, it may not be possible to properly 
define the universe that should be surveyed to determine the 
appropriate prevailing wages. One possible alternative the Department 
said it would explore is the use of the prevailing wage data it 
currently collects in surveying institutions of higher education to 
determine prevailing wages for one universe consisting of institutions 
of higher education, affiliated or nonprofit research institutions, and 
nonprofit research organizations. The Department also stated that data 
currently being collected by the Office of Personnel Management (OPM) 
may be able to be used to determine prevailing wages for Federal 
Governmental research organizations.
    The Department sought comments on the appropriate universes to use 
in determining prevailing wages for the entities (employers) mentioned 
in the ACWIA, methods to develop an appropriate universe, and the 
feasibility and appropriateness of the Department's using data 
collected from institutions of higher education and Federal 
Governmental research organizations to determine prevailing wages.
    In the period since the NPRM was published, INS has published its 
Final Rule implementing the fee provisions of the ACWIA (65 FR 10678; 
February 29, 2000). These regulations include provisions defining 
organizations which are exempt from the H-1B petition filing fee. As 
discussed above, the ACWIA defines exempt organizations as those 
organizations described in section 212(p)(1). More recently, the 
October 2000 Amendments (Pub. L. 106-311) amended section 214(c)(9) of 
the INA to provide a modified definition of organizations exempt from 
the fee. However, this recent provision has no effect on the 
Department's prevailing wage obligation.
    The Department received six comments on this section of the NPRM. 
The American Council on Education (ACE) also attached a copy of its 
comments on the INS Interim Final Rule. The Department also reviewed 
the comments received by INS pertaining to this issue.
    With respect to definitions of covered entities, ACE and the 
Association of Independent Research Institutes (AIRI) commended the 
efforts of federal agencies to jointly develop regulatory definitions, 
and urged that all regulations that implement ACWIA sections include 
identical definitions, regardless of the agency source of the 
regulation.
    AIRI stated that the proposed definitions adequately cover its 
member institutions--independent, nonprofit research institutions 
performing basic and clinical research in behavioral sciences. 
Similarly, the Smithsonian Institution stated that it had no problem 
with the definitions, stating that it believes that it qualifies as 
both a nonprofit research organization and as a governmental research 
organization.
    ACE observed that the new section 212(p)(1) references only those 
institutions included in section 101(a) of the Higher Education Act of 
1965. (ACE pointed out a typographical error in the NPRM, which 
referenced section 801 of the Higher Education Act rather than section 
101(a).) The Higher Education Amendments of 1998 (Pub. L. No. 105-244, 
112 Stat. 1581 (Oct. 7, 1998)), reauthorized the Higher Education Act 
and made a number of amendments. Institutions contained in sections 
101(a) and (b) of the Act as amended in 1998, 20 U.S.C. 1001(a) and 
(b), were formerly contained in 20 U.S.C. 1201(a), which itself 
incorporated 20 U.S.C. 1088. ACE stated its belief that Congress 
inadvertently neglected to reference section 101(b) as well as section 
101(a) of the Higher Education Act as amended in 1998 when it passed 
the ACWIA. ACE requested that the definition of an ``institution of 
higher education'' contained in the NPRM therefore be modified to 
include both section 101(a) and section 101(b), pending clarification 
by the Department of Education or a technical amendment. Unless this is 
done, ACE contends, some categories of higher education, such as 
independent medical colleges or graduate universities, might not 
qualify for the academic prevailing wage determination.
    ACE further stated, with respect to definitions, that the NPRM did 
not define a ``governmental research organization.'' Both AILA and ACE 
stated that the definition should indicate that such organizations 
include all federal, state, and local government laboratories 
conducting scientific and/or scholarly research. ACE also noted that 
FFRDCs are operated by contractors rather than the Federal Government 
itself. ACE suggested that FFRDC contractors should be eligible for the 
academic prevailing wage if they are institutions of higher education, 
affiliated or related nonprofit entities, nonprofit research 
organizations, or governmental research organizations. ACE also 
recognized the problem inherent in applying the prevailing wage 
methodology provided for by section 212(p)(1) to for-profit contractors 
that operate FFRDCs. Nonetheless, ACE indicated it considered all 
FFRDC's to be members of the academic research community, and expressed 
hope that the Department will work with the ACE and the FFRDC 
contractor community to develop an appropriate solution to allow all 
academic researchers to be treated equally.
    ACE also urged that the definition of ``affiliated or related 
nonprofit entity'' include, in addition, those nonprofit research 
hospitals which have an

[[Page 80183]]

historic affiliation with universities but do not meet the strict 
definition of ``affiliation'' in the INS Interim Final Rule. ACE 
proposed a specific modification of the definition to accommodate these 
hospitals. Similarly, AILA maintained in the comments it submitted to 
INS, that ``[c]ertain non-profit or governmental (non-research) 
institutions may have arrangements for the sharing of information, 
training or research with educational institutions, yet would not by 
this definition [of affiliated or related non-profit entity] be exempt 
from the fee.''
    Finally, ACE urged that the definition of nonprofit organizations 
or entities be modified so that a state or local organization exempt 
from tax under IRC Section 115 or under an applicable state law 
qualifies as a nonprofit organization or entity for purposes of the 
ACWIA. By doing so, ACE contends, the Department's regulation would be 
consistent with the INS Interim Final Rule.
    The Research Corporation of the University of Hawaii (RCUH) sought 
clarification regarding its status. RCUH explained that it was 
established by the State of Hawaii as a ``public instrumentality,'' 
part of the University of Hawaii ``for administrative purposes only,'' 
and non-profit under state law but not under the IRC. It expressed the 
view that both DOL and INS had failed to consider the special category 
of public/private semi-autonomous, non-profit research organizations 
created by other government agencies, and that they fit within the 
intent of the ACWIA language regarding non-profit research 
organizations.
    In its comments on the definition provisions of the NPRM pertaining 
to nonprofit research organizations and Governmental research 
organizations, AILA maintained that the use of the word ``scientific'' 
connotes a natural science like chemistry or physics, but not a social 
science like history or sociology. In addition, AILA opined that the 
distinction between basic research and applied research is often a 
distinction drawn within the natural sciences, and that the NPRM 
therefore implies that DOL believes that ACWIA amendments covers only 
nonprofit organizations engaged in natural science research. The ACWIA 
amendments, according to the AILA, broadly refer to research and 
nowhere introduce the language limiting the amendment to natural 
science research.
    With respect to the definition of ``nonprofit research 
organization,'' AILA opined that nonprofit research organizations 
engaged in substantial research should be covered by the ACWIA 
amendments, whether or not research is the nonprofit's primary purpose. 
AILA suggested that the Department's definition of nonprofit research 
organizations include ``organizations primarily engaged in research and 
organizations engaged in research as an essential or significant 
element of their operations.''
    A law firm representing Texas school districts and private schools 
(Tindall and Foster) commented that elementary and secondary 
educational institutions should be exempt from the filing fee because 
they operate on tighter budgets than institutions of higher education 
and because of the critical shortage of bilingual teachers. That 
commenter also stated that ACWIA prevailing wage provisions should 
include elementary and secondary education institutions.
    With regard to the comments by ACE that the definition of ``(a)n 
institution of higher education'' presented in the NPRM should be 
modified to include those institutions contained in section 101(b), as 
well as those contained in section 101(a) of the Higher Education Act, 
as amended by the Higher Education Amendments of 1998, the Department 
believes it is constrained by the unambiguous statutory language to 
include only those institutions in section 101(a). Furthermore, there 
is no indication in the legislative history as viewed in conjunction 
with the history of the Higher Education Amendments to indicate 
Congress intended to include section 101(b).
    Concerning the view expressed by ACE and AILA that the definition 
of a ``Governmental research organization'' should include state and 
local government laboratories conducting scientific and/or scholarly 
research, the Department has concluded that by Congress' use of the 
initial capital ``G'' in the word ``Governmental'' in the statute, 
Congress intended to limit the provision to the Federal research 
organizations. In the INA, the words ``Government'' and ``government'' 
appear numerous times. It appears that only when a small ``g'' is used, 
does the term include state and local as well as Federal government 
agencies. See the discussion in C. Stine, ``Out of the Shadows: 
Defining `Known to the Government' in the Immigration Reform and 
Control Act of 1986,'' 11 Fordham Int'l L.J. 641, 653 (Spring 1988); 
see also Kalaw v. Ferro, 651 F. Supp. 1163 1169-70 (W.D.N.Y. 1987). 
Furthermore, throughout the Omnibus Consolidated and Emergency 
Supplemental Appropriations Act, 1999, Pub. L. 105-277, 112 Stat. 2681 
(Oct. 21, 1998), of which the ACWIA is a part, it appears that a 
capital ``G'' is used to mean the United States government or the 
government of a foreign nation, while a small ``g'' is used to refer to 
state, local, and tribal governments (unless the complete term 
``Federal government'' is used). See also, State Bank of Albany v. 
United States, 530 F.2d 1379, 1382 (Ct. CL. 1976).
    The Department agrees with the view expressed by ACE that the 
status of entities contracting with FFRDCs determines the application 
of the special provisions of Section 212(p)(1). An academic institution 
operating an FFRDC, for example, would obtain the prevailing wage 
determination applicable to academic institutions. The determination of 
prevailing wages for for-profit employers that operate FFRDCs is 
outside the scope of the proposed rule and is not addressed in this 
document.
    As noted above, ACE recommended that the definition of ``[a]n 
affiliated or nonprofit entity'' be modified to include other 
``nonprofit research hospitals'' that do not meet the definition of 
``affiliation'' in the Department's NPRM and the INS Interim Final Rule 
and, because their primary mission is patient care, do not meet the 
definition of a ``nonprofit research organization.'' Specifically, ACE 
recommended that the phrase ``or through a documented understanding or 
affiliation'' be added to the definition. The Department is of the 
view, however, that the definition of ``affiliated or related nonprofit 
entity'' in the NPRM and the INA Interim Final Rule is consistent with 
the ordinary meaning of the phrase. The definition proposed by ACE is 
inappropriately broad and would likely include many entities in 
addition to the ones about which ACE and AILA are concerned. 
Consequently, the Department has decided not to adopt the modification 
to the definition of ``affiliated or nonprofit entity.''
    In support of its view that the definition of a nonprofit 
organization or entity should be modified to include organizations 
exempt from tax under section 115 of the IRC (26 U.S.C. 115) or under 
an applicable state law as a nonprofit organization or entity, ACE 
stated that INS covers such organizations in its interim rule. To the 
contrary, the INS Interim Final Rule at 8 CFR 214.2(h)(iv) does not 
provide that organizations can qualify as nonprofit entities on the 
basis of being exempt from tax under IRC Section 115 or under an 
applicable state law, but instead provides at Sec. 214.2(h)(iv):

    For purposes of paragraphs (h)(19)(B) and (C) of this section, a 
nonprofit organization or entity is one that is qualified as a tax 
exempt organization under section 501(c)(3),

[[Page 80184]]

(4) or (6) of the Internal Revenue Code of 1966 (26 U.S.C. 
501(c)(3), (c)(4) or (c)(6)) and has received approval as a tax 
exempt organization from the Internal Revenue Service, as it relates 
to research or educational purposes.

The preamble to the INS Interim Final Rule (63 FR 65658) does 
acknowledge that certain organizations (e.g., churches) qualify for 
nonprofit status without a notice from the IRS confirming such status. 
(It is unlikely that such organizations would be institutions of higher 
education and related or affiliated institutions, or nonprofit and 
Governmental research organizations.) The INS goes on to state that it 
believes that most employers of specialty occupation workers claiming 
an exemption will be able to meet the evidentiary requirement specified 
in the rule, either with a notice from the IRS or other documents 
demonstrating the United States employer's nonprofit status. The 
Department agrees with these statements by INS. The preamble to the INS 
rule does not indicate that nonprofit status will in any instance be 
determined by the employer's tax exempt status pursuant to IRC Section 
115 or state law. Moreover, we see no reason to include entities 
encompassed by Section 115 within the definition of nonprofit entities. 
Section 115 does not purport to be a list of tax-exempt organizations, 
but rather is a reference to the kinds of state income which are 
excluded from gross income in determining income tax. Furthermore, the 
Department believes that it is generally accepted that nonprofit status 
is determined by an entity's status under section 501(c). If Congress 
wanted an entity's nonprofit status to be determined by state law, 
Congress could have expressly so provided.
    Based on the foregoing, this rule provides, as does INS' Interim 
Final Rule, that a nonprofit organization or entity is one that is 
qualified as a tax exempt organization under IRC section 501(c)(3), 
(c)(4) or (c)(6), and has received approval from the Internal Revenue 
Service as it relates to research or educational purposes.
    As indicated above, AILA believed the Department was implying in 
the NPRM that the ACWIA amendments and the definitions in the NPRM 
pertaining to nonprofit research organizations and Governmental 
research organizations only applied to organizations engaged in natural 
science research. The definitions of basic research and applied 
research used in the NPRM (and the INS interim rule) are based on the 
definitions of ``Basic Research'' and ``Applied Research'' found on 
pages 4-9 of Science & Engineering Indicators--1996, published by the 
National Science Foundation (NSF). The materials contained in the NSF 
publication indicate that these definitions apply to the social and 
behavioral sciences (which include psychology, sociology and other 
social sciences), as well as the natural sciences (which include all 
physical, earth, atmospheric, biological and agricultural sciences). 
NSF staff have confirmed that the NSF definitions of basic and applied 
research apply to both the social and natural sciences. These 
definitions are used in NSF's resource surveys and are well understood 
by members of the research community. The Department has revised the 
regulation to provide that ``research'' includes research in the 
sciences, social sciences, and humanities.
    The Department has also concluded that the definition of nonprofit 
research organization should be limited to organizations primarily 
engaged in research. We believe this is most consistent with the 
statutory phrase ``research organization.'' Furthermore, Senator 
Abraham's statement, quoted above, indicates a specific Congressional 
intent that the determination of the prevailing wage not include other 
types of nonprofit entities. In addition, since workers in all 
occupations for which nonprofit research entities file H-1B labor 
condition applications or applications for alien employment 
certification are potentially affected by the ACWIA prevailing wage 
amendments, the proposed modification could affect large numbers of H-
1B workers not engaged in research or related activities, thereby 
increasing the possibility of an adverse effect on U.S. workers who are 
not engaged in research or related activities. The Department believes 
such a construction would not be consistent with Congressional intent.
    As indicated above, AILA indicated in its comments that the groups 
included in prevailing wage determinations should only include 
``similarly employed'' individuals. This issue is outside the scope of 
this rulemaking. However, it is the Department's position that all 
occupations included within an OES occupational group for which 
prevailing wage determinations are provided are ``similarly employed.'' 
The Department also notes that the OES does collect data for faculty 
members by certain disciplines in accordance with an agreement reached 
with the academic community.
    With regard to the collection of prevailing wage data and 
prevailing wage determinations, ACE and AIRI strongly supported the 
Department's approach as the most feasible solution to meeting the 
ACWIA requirements. These two organizations observed that institutions 
of higher education, affiliated and related research institutions, and 
nonprofit research organizations, are comparable for prevailing wage 
purposes due to the similarity of their missions and employment of H-1B 
nonimmigrants. ACE recommended a separate category for governmental 
research organizations based on their understanding that pay scales and 
wages for government research labs and other related activities are 
established and predetermined by federal, state and local governments, 
and do not necessarily correspond to the other three groups. The 
Smithsonian Institution opposed this approach, and urged the Department 
to treat all groups as a single universe for purposes of determining 
prevailing wage levels. The Smithsonian also noted that the NPRM did 
not address the issue of how organizations in the four groups are to 
make their status known to the local SESA for prevailing wage 
determinations. Moreover, the Smithsonian recommended that the 
Department follow the example of the INS for I-129W, with no additional 
evidentiary requirements.
    ACE also expressed concern regarding the Department's treatment of 
independent academic wage surveys, stating its view that much DOL and 
state and local government academic wage information is inaccurate due 
to inclusion of an insufficient number of academic institutions. It 
therefore encouraged the Department to adopt independent surveys of 
academic wages.
    AILA argued that the division of employer groups into two distinct 
subparagraphs in section 212(p)(1) is indicative of Congressional 
intent to treat the two groups separately. AILA further commented that 
the groups included in the prevailing wage determination should only 
include similarly employed individuals, as distinguished from a group 
of occupations. AILA also stated that similarly employed workers should 
include reference to the skills and knowledge required by the position.
    As noted in the NPRM, the Department does not believe that the 
ACWIA requires that the four types of organizations be grouped in any 
particular way in determining the universe for prevailing wage surveys. 
The Department agrees with AIRI and ACE that there are substantial 
similarities among employment found in colleges and universities, 
affiliated or

[[Page 80185]]

related nonprofit entities, and nonprofit research organizations. 
Therefore, the Department plans to use the data it currently collects 
in surveying institutions of higher education to determine prevailing 
wages for institutions of higher education, related or nonprofit 
entities, and nonprofit research organizations.
    The Department also agrees with ACE that pay scales for 
Governmental research laboratories and other related activities are 
established by the Federal government and do not necessarily correspond 
with the three other groups mentioned above. For this reason, the 
Department does not contemplate including Governmental research 
organizations in the same universe as the other three types of 
organizations unless the technical problems in determining prevailing 
wages for the Government research organizations prove to be 
insurmountable. The Department intends to use data currently being 
collected by the Office of Personnel Management relating to Federal 
Government employment to determine prevailing wages for Federal 
Government research organizations if certain technical issues can be 
satisfactorily resolved. One possible alternative approach would be to 
use Government-wide prevailing wage data by occupation as a proxy for 
prevailing wages in Government research organizations.
    As an interim measure, since the prevailing wage provisions were 
effective on enactment of the ACWIA, the Department has issued a 
directive that provides that prevailing wages for institutions of 
higher education, affiliated or nonprofit entities, nonprofit research 
organizations and Government organizations should be based on the wages 
now being collected by the Occupational Employment Statistics Program 
for colleges and universities. General Administrative Letter No. 2-99, 
(GAL 2-99) dated April 23, 1999, ``Subject: Availability and Use of 
Occupational Employment Statistics Survey Data for Alien Labor 
Certification Purposes.'' With regard to ACE's comments on use of 
independent academic wage surveys, the Department points out that its 
guidance in GAL 2-98, dated October 31, 1997, ``Subject: Prevailing 
Wage Policy for Nonagricultural Immigration Programs,'' allows 
employers to submit their own surveys, which will be used by the SESA 
to determine prevailing wage if they meet the required standards.
    With respect to the suggestion from the law firm that elementary 
and secondary educational institutions should be made exempt from the 
filing fee and should be included within the scope of the prevailing 
wage provisions, the Department notes that the fee provision has been 
modified by the October 2000 Amendments to exempt such organizations, 
but no such modification was made to the prevailing wage provisions.
    The Smithsonian Institution in its comments points out that one 
issue not addressed in the NPRM is how the categories of employers are 
to make their status known when they ask the local SESA for a 
prevailing wage determination. These provisions have been in effect 
since enactment of the ACWIA and the Department has not found that any 
additional paperwork requirements are necessary. The Department 
anticipates that employers which are entitled to this provision will 
make themselves known. If additional guidance is necessary, the 
Department will provide it.
    The regulatory text consistent with the above discussion is 
incorporated in the rules for the Permanent program, 20 CFR part 656, 
Sec. 656.40(c). Conforming changes are made to cross-reference this 
provision in Sec. 656.40(a) and in the H-1B regulations at 
Sec. 655.731(a)(2) and (3). In addition, the related provisions 
concerning prevailing wages for academic institutions and certain 
Federal research agencies at Sec. 656.3 (definition of ``Federal 
research agency'') and Subpart E, Sec. 656.50, are deleted.
    Finally, Section 415(b) of the ACWIA provides that these special 
prevailing wage provisions apply to computations made for applications 
filed on or after the date of enactment of the ACWIA, and to 
applications filed earlier ``to the extent that the computation is 
subject to an administrative or judicial determination that is not 
final as of such date.'' Thus, as discussed above, the amendments made 
to Secs. 655.731(a)(2) and 656.40 are effective immediately, and apply 
to all cases in which the determination of the prevailing wage was not 
yet finally determined administratively pursuant to the regulations at 
Parts 655 and 656. Moreover, they are applicable to any cases pending 
in Federal court which were not finally decided where the prevailing 
wage determination was under review, as of the date of enactment.

O. What H-1B Regulatory Matters, in Addition to the ACWIA Provisions, 
Are Addressed in This Interim Final Rule?

    In the NPRM, the Department re-published for further notice and 
comment some of the provisions of the Final Rule promulgated in 
December 1994 which had been proposed for comment on October 31, 1995, 
during the pendency of the NAM litigation. That litigation resulted in 
an injunction against the Department's enforcement of some of these 
provisions on Administrative Procedure Act procedural grounds (National 
Association of Manufacturers v. Reich, No. 95-0715, D.D.C. July 22, 
1996).
    As explained in the NPRM, some of the provisions of the Final Rule 
were modified in the NPRM in light of ACWIA requirements and others in 
light of comments received in response to the October, 1995 proposal.
    This Interim Final Rule is based on the Department's consideration 
of all comments received, both on the 1995 proposal and the recent 
NPRM.
1. What Are the Standards or Restrictions for Placement of H-1B Workers 
at Locations Other Than Those Identified on the Original LCA? 
(Sec. 655.735)
    In the NPRM, the Department dealt separately with three related 
matters concerning the work locations of H-1B workers and the movement 
of such workers to new locations. These matters, which are of 
significant concern to users of the H-1B program, were: the regulation 
concerning short-term placement of H-1B workers at worksites not 
covered by any LCA (NPRM Section O.1); the interpretation of the term 
``place of employment''/''worksite,'' which affects many of the 
employer's LCA obligations (NPRM Section P.1); and the interface among 
the regulatory provisions affecting the ``roving'' or ``floating'' of 
H-1B workers away from their home base worksite(s) (NPRM Section P.2). 
Because the reactions of commenters indicated some confusion about the 
interplay among these three matters, they are addressed in the 
following combined discussion.
a. What Are the Opportunities and Guidelines for Short-Term Placement 
of H-1B Workers at Worksite(s) Outside the Location(s) Listed on the 
LCA? (NPRM Section O.1)
    Regulations to authorize short-term placement of H-1B workers at 
places of employment outside the areas of intended employment listed on 
the employer's LCA(s) were first published by the Department in the 
December 20, 1994 Final Rule. The structure and application of this 
short-term placement option assumes that the new location to which an 
H-1B worker is sent is, in fact, a ``place of employment'' or 
``worksite'' for that worker. However, as discussed below, not every 
physical location at which an H-1B worker's duties are

[[Page 80186]]

performed will constitute a ``worksite'' for that worker (see 
subsection b, below). It is important for employers to recognize that 
if the location is not a ``worksite'' for that H-1B worker, then the 
short-term placement provision will not be applicable to that worker at 
that location and, consequently, the placement of the worker there will 
not be subject to the requirements of this section of the regulation 
(see IV.O.1.b and c, below). The following discussion of the short-term 
placement option is, therefore, based on the assumption that the H-1B 
worker(s) will be temporarily placed at worksites which are not covered 
by an LCA.
    Prior to promulgation of the short-term placement option, an 
employer was not permitted to employ a worker at a worksite in any area 
unless the employer had a certified LCA covering that area of 
employment. Section 655.735(b)(4) of the 1994 Final Rule provided the 
short-term placement option, whereby ``the employer's placement(s) of 
H-1B nonimmigrant(s) at any worksite(s) in an area of employment not 
listed on the employer's labor condition application(s) shall be 
limited to a cumulative total of ninety (90) workdays within a three-
year period, beginning on the first day on which the employer placed an 
H-1B nonimmigrant at any worksite within such area of employment.'' 
This provision was intended by the Department to allow employers 
greater flexibility in deploying their H-1B workers in response to 
business needs and opportunities in new areas. The Department 
recognized that an employer could, in any such situation, choose to 
file a new LCA covering the new worksite at which it intended to place 
H-1B workers. However, the Department sought to provide a mechanism by 
which an employer--desiring to move its H-1B worker(s) quickly, or 
contemplating a temporary operation in a new location--could be 
accommodated under the program without the delay or obligations 
involved in filing a new LCA. With that goal in mind, the regulation 
authorized an employer to use H-1B worker(s) at worksite(s) in an area 
of employment not covered by an existing LCA for a total of 90 workdays 
within a three-year period, without having to file a new LCA for that 
new area. Essentially, the Department created a limited exception to 
the rule that there must be an LCA covering every worksite at which an 
H-1B worker is employed. By creating this exception, the Department 
enabled employers wishing to use H-1B worker(s) to respond immediately 
to an opportunity or a problem in a non-LCA location without waiting to 
prepare and file an LCA for that location. If the situation requiring 
quick response by H-1B worker(s) was resolved within the regulation's 
``short-term'' window, then a new LCA would never be required. If, on 
the other hand, the H-1B worker(s) would be needed at worksite(s) in 
the new area for a longer period of time, the employer would have ample 
time to prepare and file a new LCA while already using the H-1B 
worker(s) there. The ``short-term'' placement regulation set forth in 
the 1994 Final Rule specified that the ``short-term'' 90-day period 
would be calculated by totaling all days of work by all the employer's 
H-1B workers in the area of employment (covering all worksites within 
that area), beginning with the first workday of any H-1B worker at any 
worksite in that area. The 90-day period was applied separately to each 
new area of employment (i.e., a separate 90-day period was available 
for each new city or commuting area).
    This provision was enjoined because of lack of appropriate notice 
and comment, in the NAM decision. In the meantime, the provision was 
published for comment in the October 31, 1995, Proposed Rule. The 
Department received eight comments in response to the 1995 proposed 
rule. All eight commenters considered the proposed ``short-term'' 
placement option to be unworkable. Several commenters (ACIP, Intel, 
Microsoft, Motorola, NAM) described this option as particularly 
burdensome to employers with many employees in positions where movement 
is required as a normal incident of job duties.
    ACIP, Intel, and Microsoft commented that large employers, with 
many employees dispersed over a number of worksites, did not have the 
practical ability to keep track of cumulative work days for H-1B 
workers for every location to which the employees travel for business. 
Microsoft added that the ``short-term'' placement option effectively 
prevented H-1B employees from participating in joint development 
projects with development partners. Microsoft recommended that the rule 
be revised to increase the number of short-term placement days from 90 
to 180 and that the regulation impose the time test on a per employee 
basis, rather than on a location basis; apply it to a specific worksite 
and not any worksite within the area of employment; and require a new 
LCA only when the principal place of employment is changed. Intel and 
ACIP recommended that the Department revise its approach to the roving 
employee to one which differentiates between companies that are 
dependent on foreign workers (employee base is comprised of more than 
15 percent 
H-1B workers) and those that are not dependent. Such a system, Intel 
opined, would enable the Department to better focus its enforcement 
activities, while not penalizing non-dependent employers with excessive 
paperwork. ACIP further suggested that additional paperwork 
requirements should apply only when travel to another location involves 
``performance of services'' and the H-1B worker does not remain under 
the ``sole control'' of the H-1B employer. ACIP also suggested that 
additional H-1B workers should be able to travel to any location for 
which an LCA is already on file for that employer and occupation, 
without any additional paperwork. AILA and NAM objected to the 
cumulative nature of the proposed rule and its application to an entire 
area, rather than to a given work site. ACIP, along with Coopers & 
Lybrand and CBSI, recommended that the 90-day limit should apply to one 
employee at one specific worksite, rather than for all of the 
employer's H-1B workers.
    Based on the comments received in response to that 1995 
publication, the 1999 NPRM proposed and requested comments on a 
modified version of the provision--allowing the employer to utilize the 
``short-term'' placement option in an area of employment without an LCA 
until any individual 
H-1B worker works for 90 days at any worksite or combination of 
worksites in the area of employment. Under the proposal, the 90 
workdays would be counted on a per-worker basis. The proposal specified 
that as soon as one H-1B worker has worked more than 90 workdays within 
that area of employment, no more work can be performed by any H-1B 
worker at any worksite in that area unless, and until, the employer 
files and ETA certifies an LCA for the area. In other words, the entire 
workforce and all worksites in the area of employment would be subject 
to a new LCA once any one H-1B worker has worked 90 days in a three-
year period in the area.
    Twenty commenters addressed the NPRM revisions to the short-term 
placement rule, including those who commented in both 1995 and 1999.
    The AFL-CIO objected to the existence of a short-term placement 
option. It expressed the view that the Department had given H-1B 
employers an unnecessary and harmful ``benefit of the doubt'' in the 
proposed regulation, and that employers may use short-term placement to 
avoid prevailing wage and notice requirements.

[[Page 80187]]

    Several commenters considered the rule to be complex and burdensome 
for employers. Seven commenters (ACIP, AILA, Cowan & Miller, Rubin & 
Dornbaum, White Consolidated Industries, Network Appliance, FHCRC) 
stated that the Department's proposal unrealistically requires the 
human resources staff at a large company to keep track of personnel 
movement from multiple divisions or offices to various customer sites 
around the country. Three commenters (Senators Abraham and Graham, 
Congressional commenters, and Oracle) stated that the Department has no 
authority, explicit or implicit, to impose what they believe is a 
complex monitoring requirement under the rule.
    AILA stated that the Department's proposed modification to the rule 
was unresponsive to employers' fundamental concerns. AILA recommended 
that the regulation should have no bright-line test for the amount of 
time constituting temporary placement versus permanent re-assignment to 
the new non-LCA worksite. AILA suggested that the distinction between 
temporary and permanent placement should be based ``on all of the facts 
and circumstances of the situation,'' including such facts as whether 
the H-1B worker's ``place of abode'' has changed, whether the worker's 
business card shows the new work address, and whether the worker has a 
phone line and work station at the new worksite. AILA also suggested 
that, if a time test were to be used in the regulation, it should 
operate as a presumption rather than a bright-line rule (i.e., once the 
time limit had been reached, a presumption would arise that the 
worker's place of employment had changed, but the employer could rebut 
the presumption by showing that the placement was temporary in light of 
the facts and circumstances). Further, AILA suggested that the 
determination of temporary versus permanent placement should be 
examined in an enforcement context, rather than be subject to a bright-
line rule.
    Eight commenters expressed concerns regarding the proposed 
regulation's time test of 90 cumulative workdays for any H-1B worker 
over a three-year period. Four commenters (ACIP, AILA, Oracle and SBSC) 
stated that limiting an individual worker to an average of 30 workdays 
per year (90 days over a three-year period) in any one geographic area 
would severely limit a company's ability to do business in the area. 
Two commenters (ACIP, AILA) stated that 90 workdays over three years is 
unreasonable; they suggested that the regulation allow 90 days per year 
rather than 90 days over three years (i.e., three times the cumulative 
workdays stated in the NPRM time test). Three commenters (ACIP, ITAA, 
and Hammond) suggested that the time test be applied to each H-1B 
worker for each worksite (i.e., the 90-day count would restart if the 
worker moved to a different worksite within the same area of 
employment, and one worker's accumulation of 90 workdays would have no 
effect on the rest of the employer's H-1B workforce in that area). In 
this regard, two commenters (Hammond, ACIP) commended the Department's 
modification of the regulation to provide for a workday count on a 
worker-by-worker basis (rather than a cumulative count of all workdays 
of all of an employer's H-1B workers in the area of employment), but 
ACIP nevertheless asserted that the modified regulation was unworkable 
since large employers do not track workers in such a manner. Two 
commenters (University of California, ACE) stated that the limitation 
of 90 cumulative workdays in a three-year period may have an adverse 
effect on academic researchers, whose research activities would not 
likely exceed 90 consecutive days but may require more than 90 
cumulative workdays in a three-year period. These commenters suggested 
an exception to the time test, for researchers working for higher 
education institutions, government labs and research affiliated units 
for activities directly related to their research where the research 
requires travel and work at sites that have one of a kind equipment.
    The Department has carefully considered the views of the AFL-CIO, 
which objected to the existence of the short-term placement option 
because of the potential for employer avoidance of H-1B program 
obligations applicable to the workers' new worksites. The Department 
shares this concern that employers' obligations be met and that U.S. 
workers be protected through the prevailing wage and notice 
requirements. However, the Department believes that it is appropriate 
and important to provide H-1B employers with a regulatory mechanism to 
accommodate legitimate business needs while, at the same time, 
preserving the program's protections. Without the regulation's short-
term placement option, an employer would, quite literally, be unable to 
place any H-1B worker at any worksite that is not already covered by an 
LCA; the employer would have to prepare and file an LCA and await ETA 
certification prior to dispatching any H-1B worker(s) to such a 
worksite. Considering the fast pace of business--especially in 
industries such as information technology--the delay involved in the 
LCA process could handicap an employer which needed to use its H-1B 
workers to respond to a business need or opportunity at a non-LCA 
worksite. The Department considers the short-term placement option to 
be a reasonable means by which the employer may meet its obligations 
both in its business and in the H-1B program. This option allows the 
employer to move its H-1B worker(s) quickly, but also requires that the 
employer continue to comply with 
H-1B standards (e.g., paying ``home base'' wages plus travel expenses 
to H-1B worker(s) in short-term placement). By setting a limitation on 
short-term placements, the regulatory provision also assures that the 
employer which needs to use its H-1B worker(s) at the new worksite 
beyond such a time-frame will have to fully comply with all statutory 
obligations for that location (e.g., provide notice, obtain local 
prevailing wage rate and make any pay adjustments needed to meet that 
rate).
    The Department recognizes that some employers and interest groups 
view the short-term placement option as impractical and burdensome. 
These commenters view the regulation as requiring employers to keep 
detailed records of placement of H-1B worker(s) to non-LCA worksite(s) 
in order to ensure that the workday limit is not exceeded by any 
worker. The Department considers it important to emphasize that the 
short-term placement regulation creates an option for the employer, and 
that no employer is required to use this provision. Further, the 
regulation does not impose any recordkeeping requirements on an 
employer that chooses to make short-term placements; the employer may 
utilize any appropriate means to ensure that the workday limit is not 
exceeded. Obviously, an employer may avoid all the perceived 
``burdens'' of the short-term placement regulation simply by 
withholding its H-1B worker(s) from all non-LCA worksites until after 
the LCA filing process is completed and the worker(s) can be sent to 
the new worksites pursuant to new LCAs. Or, an employer may promptly 
file a new LCA when the first H-1B worker is sent to a non-LCA 
worksite, so that the LCA is certified well before the workday limit is 
reached.
    The Department also reminds employers that--regardless of whether 
they are taking advantage of the short-term placement option--they are 
obliged to be vigilant in maintaining their compliance with the H-1B

[[Page 80188]]

program's requirements, many of which are worksite-specific. The 
Department presumes that employers are taking appropriate steps to 
assure such compliance, which would logically include the employer's 
being aware of the locations of its H-1B worker(s). An employer which 
is unable to determine the whereabouts of its H-1B worker(s) would be 
handicapped in assuring that the worker(s) are employed in full 
compliance with an approved LCA (e.g., worksite notice, strike/lockout 
prohibition, local prevailing wage rate) or in accordance with the 
short-term placement option (e.g., workday limitation, travel costs).
    The Department has carefully considered but is unable to 
accommodate the suggestion that the short-term placement option have no 
``time test'' but, instead, allow a post hoc determination of temporary 
versus permanent placement based on ``all the facts and 
circumstances.'' Such an approach would, in the Department's view, be 
too vague to be effective from either the employer's or the worker's 
perspective. A bright-line test, based on workdays, affords certainty 
to the employer and to workers regarding applicable standards (e.g., 
clarity as to when a new prevailing wage or notice would be needed).
    After fully considering the commenters' views, however, the 
Department has concluded that the NPRM's time test--90 cumulative 
workdays for any one H-1B worker at any worksite or combination of 
worksites in one area of employment over a three-year period--should be 
modified to provide a more reasonable accommodation for employers' 
business needs. In the Interim Final Rule, the Department has 
maintained the worker-by-worker count of workdays (which most 
commenters endorsed) and has made an annual allocation, rather than a 
three-year accumulation, of workdays (which several commenters 
suggested). In addition, the Interim Final Rule incorporates the 
concept of short-term placement being determined, in part, based on 
facts such as the H-1B worker's maintenance of his/her workstation at 
the ``home office,'' as indicated by one of the commenters. Using these 
concepts, the Interim Final Rule provides that an employer may make a 
``short-term'' placement or assignment of an individual H-1B worker at 
any worksite or combination of worksites in a non-LCA area for a total 
of 30 workdays in a one-year period (either the calendar year or the 
employer's fiscal year, whichever the employer chooses). The Rule also 
provides that the placement may be expanded by as much as an additional 
30 workdays (thus, 60 workdays in a one-year period) if the employer is 
prepared to show that the worker maintains a workstation at the home 
office, spends a substantial amount of time at the home office, and 
maintains his/her ``place of abode'' in the area of the home office. 
Thus, under this regulation, the employer would be able to place an 
individual H-1B worker at worksite(s) in a non-LCA area for as many as 
60 workdays in a one-year period, and have that placement be considered 
``short-term'' so as not to trigger the requirements for filing and 
complying with a new LCA for the area of employment. Once an H-1B 
worker exceeds the workday limitation in a one-year period, the 
employer would not be permitted to continue the placement of that 
worker or any other H-1B worker in the same occupation in that area of 
employment, until one year from the beginning of the next one-year 
period (either the beginning of the next calendar year, or the 
beginning of the employer's next fiscal year) or until an LCA is in 
place.
    The Department believes that any greater presence by an employer's 
workforce in an area cannot be considered short-term and should require 
the employer both to provide notice to the local workforce and to pay 
local prevailing wages. Under the Interim Final Rule, the employer may 
choose how to use the annual available workdays in placing an H-1B 
worker ``temporarily'' at worksite(s) in the area of employment (i.e., 
use them all consecutively, or at different times within one year). 
While some other measurement might have been preferred by some 
commenters, the Department believes that, as a matter of common sense 
and fairness, a worker's placement at a worksite for more than the 
equivalent of 12 normal workweeks in a calendar year (60 workdays, 
five-day work weeks) cannot reasonably be characterized as ``short-
term,'' whether the workdays are taken in one block or spread over a 
period of time.
    The Department recognizes that some commenters have criticized the 
regulation as being confusing and difficult to use. Therefore, the 
Interim Final Rule contains clarifying changes which make the provision 
more user-friendly. For example, the Rule includes a definition of the 
``one-year period'' for short-term placements (i.e., either the 
calendar year or the employer's fiscal year, whichever the employer 
chooses) and provides a clear description of the employer's choices of 
actions when the time limit for short-term placement has been reached 
(i.e., file an LCA to continue using H-1B workers, or discontinue use 
of H-1B workers until the next one-year period begins). These 
clarifications--made in response to commenters's concerns--do not 
affect the substantive requirements of the regulation.
    The Department has concluded that the same standards should apply 
to all H-1B employers. A profusion of time tests and rules for 
different industries or types of employers would increase the 
complexity of the regulation without appreciable benefit in achieving 
the purposes of the program. The employer's option of timely filing an 
LCA for the location should alleviate any ``burdens'' which might 
otherwise argue for special rules or exceptions for certain industries.
    One commenter (ACIP) suggested that the regulation should authorize 
employers to use a ``national LCA'' which would permit free movement of 
H-1B workers to any and all worksites around the country without the 
need to monitor the number of workdays at any particular worksites. 
According to ACIP, some employers pay a wage which is greater than the 
prevailing wage in any part of the country, as measured by the OES 
survey, the source of prevailing wage determinations issued by the 
Employment Service, or other published, nationwide data sources, so 
that their placements of H-1B workers at any worksites (whether 
temporarily or permanently) would have no adverse impact on local 
wages. Since this concept of a ``national LCA'' was not set forth for 
notice and comment in the NPRM, the Department cannot consider the 
matter for purposes of the Interim Final Rule. However, the Department 
is of the view that the concept warrants consideration. The Department, 
therefore, proposes it here for comment and possible inclusion in the 
Final Rule. In particular, the Department seeks comments as to whether 
such an LCA would be feasible under the statutory scheme, and also 
seeks information and suggestions as to how such an LCA would address 
each of the statutorily-prescribed attestation elements (e.g., 
collective bargaining notice or worksite notice; local prevailing wage 
rates; strike/lockout).
    The Department wishes to emphasize that it considers the various 
components of the short-term placement rule to be non-severable. After 
the injunction was issued by the court in NAM, some confusion arose 
concerning the effect of the injunction--i.e., whether short-term 
placements were permitted without any time restriction, or whether 
employers would be required to place H-1B workers only at worksites in 
areas of

[[Page 80189]]

employment with certified LCAs. The Department has approached this 
matter on a case-by-case basis, taking into account the confusion 
created by the NAM decision. However, with the issuance of this Interim 
Final Rule, the Department considers all such confusion to have been 
dispelled. Therefore, the Department cautions employers that--except in 
accordance with the strict requirements of the short-term placement 
option--the H-1B provisions of the INA and the Department's regulations 
require that an LCA be filed for any and all worksites where H-1B 
workers are employed. Violations of any of the provisions of the short-
term placement option will result in its inapplicability in its 
entirety.
i. When Is the Short-Term Placement Option Available? (Sec. 655.735)
    As explained in the NPRM, the short-term placement option would be 
available only when an employer wants to send its H-1B worker(s) who 
are already in the United States under an H-1B petition supported by an 
LCA filed by the employer to a new worksite which is in an area of 
employment for which the employer does not have an LCA in effect for 
the occupation. After the 90-workday limit is reached by any one H-1B 
worker, the short-term placement option would no longer be available 
for any H-1B worker(s) for any worksite in that area of employment; the 
employer would be required to have an LCA in effect for the new area 
and to be in full compliance with all the LCA requirements. The NPRM 
explained that the short-term placement option would not be available 
where the H-1B worker has just arrived in the United States (or has 
adjusted status), in which case the worker must be placed at a place of 
employment listed on the LCA supporting the H-1B petition for the 
worker. In addition, the short-term placement option would not be 
available where the employer is moving its H-1B worker(s) among 
worksites in one or more areas covered by valid LCAs; the worker(s) 
would be subject to the requirements of those LCAs (e.g., notice, 
prevailing wage, non-displacement for dependent employers) that cover 
those worksites. For example, as the NPRM explained, the short-term 
placement option cannot be used where the employer has an LCA in effect 
for an area of employment in order to avoid ``overcrowding'' the LCA 
with H-1B workers. As a matter of enforcement discretion in determining 
whether a violation exists in an ``overcrowded'' LCA situation, the 
Department will look at all the facts and circumstances in order to 
determine whether the employer is acting in good faith to assure 
compliance with the program, including taking steps to file new LCA(s) 
and rectify the overfilling of the numerical limitation specified by 
the employer itself on the initial LCA(s).
    The Department received three comments addressing the specifics of 
the availability of the short-term placement option. ACIP commended the 
Department for demonstrating flexibility and for clarifying that an 
employer may file LCAs with multiple, open slots and use those slots 
for roving employees. However, ACIP sought clarification that short-
term placements under the 90-workday rule do not ``fill'' an open LCA 
slot. ACIP also sought clarification of the NPRM discussion of the 
temporary placement of H-1B workers ``overfilling'' a valid LCA, 
particularly concerning the Department's use of enforcement discretion 
in such situations. ACIP suggested that, due to the lengthy processing 
time of LCAs, the Department should permit the employer to ``overfill'' 
an LCA. The second commenter, ITAA, stated that, in its view, the 
Department's past practice was to ignore ``LCA overcrowding'' if the 
employer met the notice and wage requirements for each worker at the 
site. ITAA observed that, under the proposed regulation, the Department 
stated an intention to use its enforcement authority and cite 
violations for ``LCA overcrowding'' if the number of H-1Bs 
``significantly exceeds'' the number of openings listed on the LCA. 
ITAA anticipated that DOL would assess penalties for ``misrepresenting 
a material fact'' or a ``substantial failure'' to accurately list the 
information on the LCA. Therefore, ITAA requested a definition of 
``significant'' overcrowding of the LCA. The third commenter, Latour, 
suggested that the Department be flexible regarding ``overfilled'' LCAs 
and consider employers' explanations in those situations where the 
``overfill'' is significant.
    As for the concerns of the commenters regarding the potential use 
of the short-term placement option to deal with situations of 
``overcrowded'' or ``overfilled'' LCAs, the Department points out that 
the statute expressly requires that the employer's LCA ``specif[y] the 
number of workers sought,'' and further provides that a substantial 
failure to comply with this requirement can result in the assessment of 
a $1,000 civil money penalty and one-year debarment (8 U.S.C. 
212(n)(1)(D) and 212(n)(2)(C)(i)). The number of H-1B workers taking 
jobs in a local labor market is a matter which Congress obviously 
considers to be significant, and the Department cannot set aside the 
statutory requirement that the employer accurately attest to this 
specific information. The Department is not aware of serious problems 
concerning overcrowded LCAs since the H-1B program's inception. Thus, 
the Department has used, and will continue to use, a rule of reason in 
assessing such situations; violations will not be cited as long as the 
employer is showing good faith and is taking steps to come into 
compliance. The determination would necessarily be made on a case-by-
case basis, and it is not feasible to issue bright-line rules such as 
some particular degree of overcrowding which would be tolerable.
    With respect to the query as to whether the use of the short-term 
placement option would affect the ``overcrowding'' determination, the 
Department emphasizes that where an LCA is in effect, the short-term 
placement option is simply not applicable. The LCA's terms--including 
its specification of the number of H-1B workers to be employed in the 
area-- are binding on the employer, except with respect to an H-1B 
worker who moves into and out of the area without establishing a 
``worksite'' there (see IV.O.1.b, below).
ii. What Are the Standards for Payment of the H-1B Worker's Travel 
Expenses Under the Short-Term Placement Option? (Sec. 655.735(b)(3), 
Previously Set Forth in Appendix B, Section a)
    A component of the proposed short-term placement option is the 
requirement that employers who wish to avail themselves of this option 
pay travel-related expenses at a level at least equal to the rate 
prescribed for Federal Government employees on travel or temporary 
assignment, as set out in the General Services Administration (GSA) 
regulations. The NPRM explained that the GSA standards were used as a 
benchmark because the Department believes that some basic, universally 
available measures are needed, and because the GSA standards (based on 
surveys of travel costs) are appropriate for this purpose. The NPRM 
proposed to modify the provisions in the current Final Rule (enjoined 
by NAM), so as to better explain the uses of the GSA standards (e.g., 
no payment to the worker for lodging would be required where the worker 
actually incurs no lodging costs).
    The nine commenters on this proposal (ACIP, AILA, Cowan & Miller, 
Hammond & Associates, Intel, ITAA, Latour, Rubin & Dornbaum, White 
Consolidated Industries) were

[[Page 80190]]

unanimous in their opposition to a regulation that would require 
employers to have separate travel reimbursement standards for H-1B 
workers than for other employees. These commenters suggested that the 
standard for H-1B workers, like all other workers, should be 
reimbursement for actual expenses incurred while on travel.
    The Department has fully considered these comments, as well as its 
own post-NAM enforcement experience. During the post-NAM period, when 
the regulation has been enjoined, the Department has been enforcing 
actual expense reimbursement for all H-1B business travelers. In these 
enforcement proceedings, the Department has not encountered problems 
pertaining to abusive practices or difficulties in proof of actual 
expenses, since it has found that employers in fact keep a record of 
expenses as a prudent business practice. Therefore, the Department is 
adopting the commenters' recommendation. The regulation is modified in 
this Interim Final Rule to specify that employers who use the short-
term placement option must reimburse H-1B workers for the actual 
expenses incurred during their short-term placement. In those rare 
instances where the employer, in an enforcement action by DOL, is 
unable to demonstrate the actual expenses incurred, the Department will 
use the GSA standards to determine whether the reimbursement was 
sufficient and to assess back wages if appropriate.
b. What Constitutes an H-1B Worker's ``Worksite'' or ``Place of 
Employment'' for Purposes of the Employer's Obligations Under the 
Program? (NPRM Section P.1) (Sec. 655.715)
    The H-1B program's requirements largely focus on the H-1B worker's 
``place of employment'' or ``worksite.'' That location controls the 
prevailing wage determination, identifies where the employer must 
provide notice to workers, and specifies the scope of the strike/
lockout prohibition. A location which is not a worksite, on the other 
hand, would not trigger those requirements, even if the H-1B worker 
were at that location in the course of the performance of job duties. 
The NPRM echoed the previous rules issued under this program at 
Sec. 655.715, which define ``place of employment'' as ``the worksite or 
physical location where the work is actually performed.'' However, the 
NPRM provided further interpretation of this term (as part of proposed 
Appendix B to Subpart H of the regulations), in an effort to better 
inform the users of the program and to alleviate some apparent 
confusion on this matter.
    The proposed guidance was in response to some employers' concern 
that a strict or literal application of the ``place of employment''/
``worksite'' definition could lead to absurd and/or burdensome 
compliance requirements with regard to the employer's obligation of 
providing required notice and adjusting the H-1B worker's wages to 
comply with different prevailing wages for work at various locations. 
Employers raised questions regarding whether the ``worksite'' 
definition would be applicable (thus either causing the worker's time 
at that location to be counted towards the 90-workday ceiling, or 
triggering compliance obligations under an LCA covering that location) 
where an H-1B worker has a business lunch at a local restaurant, or 
appears as a witness in a court, or attends a training seminar at an 
out-of-town hotel.
    The NPRM, in Appendix B, proposed that the term ``place of 
employment'' or ``worksite'' does not include any location where either 
of two criteria is satisfied:
    1. An H-1B worker who is stationed and regularly works at one 
location is temporarily at another location for a particular individual 
or employer-required developmental activity such as a management 
conference, a staff seminar, or a formal training course (other than 
``on-the-job-training'' at a location where the employee is stationed 
and regularly works). For the H-1B worker participating in such 
activities, the location of the function would not be considered a 
``place of employment'' or ``worksite,'' and such location--whether 
owned or controlled by the employer or by a third party--would not 
invoke H-1B program requirements with regard to that worker at that 
location. However, if the employer uses H-1B nonimmigrants as 
instructors or resource or support staff who continuously or regularly 
perform their duties at such locations, the locations would be ``places 
of employment'' or ``worksites'' for any such workers and, thus, would 
be subject to H-1B program requirements with regard to these workers.
    2. The H-1B worker's presence at that location satisfies three 
requirements regarding the nature and duration of the worker's job 
functions there--
    a. The nature and duration of the H-1B worker's presence at the 
location is due to the fact that either the H-1B worker's job is by 
nature peripatetic, in that the normal duties of the worker's 
occupation (rather than the nature or the employer's business) require 
frequent travel (local or non-local) from location to location, or the 
H-1B worker spends most of the time working at one location but 
occasionally travels for short periods to other locations; and
    b. The H-1B worker's presence at the locations to which the worker 
travels from the ``home'' worksite is on a casual, short-term basis, 
which can be recurring but not excessive (i.e., not exceeding five 
consecutive workdays for any one visit); and
    c. The H-1B worker is not at the location to perform work in an 
occupation in which workers are on strike or lockout.
    The NPRM provided examples to illustrate these criteria, and 
explained that for an H-1B worker who performs work at a location which 
is a non-worksite (under either criterion 1 or criterion 2), the 
``place of employment'' or ``worksite'' for purposes of notice, 
prevailing wage and working conditions is the worker's home base or 
regular work location. Further, the NPRM stated that, in applying this 
interpretation of ``place of employment'' or ``worksite,'' the 
Department will look carefully at any situations which appear to be 
contrived or abusive, such as where the H-1B worker's purported ``place 
of employment'' is a location other than where the worker spends most 
of his/her time, or where the purported ``area of employment'' does not 
include the location(s) where the worker spends most of his/her time.
    The Department received nine comments on the NPRM ``worksite''/
``place of employment'' proposal.
    Several commenters addressed the general matter of whether the 
proposed Appendix B guidance was appropriate. Senators Abraham and 
Graham and Oracle remarked that ``place of employment'' is a term with 
a plain meaning (in their view, the location where the individual is 
employed); they stated that, in modern commerce, workers employed in 
one location frequently must travel to other locations to perform their 
duties and that, when they do so, they are not employed there but are 
merely visiting. Rapidigm, a staffing firm, requested a clearer 
definition of ``worksite,'' and asked whether the amount of time spent 
at a location is the only factor, regardless of the nature of the work 
or who has control or supervision of the worker. AILA urged that the 
proposed Appendix B be dropped because, in its view, it creates an 
absurd result and is ``micromanagement'' by the Department.
    A number of commenters (ACIP, Intel, ITAA, Latour, Godward) 
expressed their approval of the Department's recognition that not all 
activities engaged in by a worker occur at a ``worksite.'' However, 
some commenters

[[Page 80191]]

were dissatisfied with the NPRM's proposal of five consecutive workdays 
as the test for a ``casual, short-term'' stay for purposes of a non-
worksite visit by an H-1B worker. ACIP, Intel and ITAA stated that this 
standard is overly restrictive and unrealistic. ACIP suggested that the 
Department should not be concerned with the length of stay, as long as 
the worker is engaged in non-worksite activities; ACIP recommended 
that, if a duration-of-stay standard was adopted, it should be 10 
workdays at least. ITAA expressed a similar view that ``casual, short-
term basis'' should be defined to include visits of up to10 consecutive 
work days to accommodate training courses, business seminars, and other 
events which may last between five and 10 days. Intel recommended that 
the focus should be on the purpose of the trip, rather than on the 
length of stay.
    The Department seeks to achieve the purposes of the Act which 
focuses its protections for workers on the ``place of employment,'' 
while accommodating the legitimate needs of employers using the H-1B 
program. The regulation, since the inception of the program, has 
recognized that the identification of the ``place of employment'' 
cannot be merely a matter of the employer's designation, since that 
approach would not serve the purposes of protecting workers' prevailing 
wages and other rights. Instead, the regulation identifies the ``place 
of employment'' by looking to the activities of the H-1B worker, 
defining ``place of employment'' as ``the worksite or physical location 
where the work is actually performed'' (20 CFR 655.715). However, the 
Department has determined that the regulation must afford reasonable 
flexibility so as to take into account the common practices of 
employers whose workers may have more than one ``place of employment'' 
over a period of time or, who may perform duties at various locations 
which should not, for practical reasons, be characterized as ``places 
of employment.'' In this regard, the Department shares the view of 
those commenters who observed that workers may legitimately ``visit'' 
locations to perform job duties without in all circumstances making 
those locations into ``places of employment'' for purposes of the H-1B 
program.
    After consideration of all the comments, the Department has 
concluded that the five cumulative workdays standard is a reasonable 
and appropriate measure of a casual, short-term ``visit'' where a 
worker's job is by its nature peripatetic. A full, ordinary workweek of 
five days is, in the Department's view, a practical and reasonable 
measurement of a business ``visit'' by a worker performing job duties. 
Further, the worker may make recurring, short ``visits'' to the 
location, in order to perform job duties. On the other hand, the 
Department believes that more flexibility is appropriate for a worker 
who spends most of his or her time at one location but occasionally 
travels for short periods to other locations. Under these 
circumstances, the Department believes that a duration of up to 10 
workdays is appropriate. The Interim Final Rule is modified 
accordingly.
    With regard to the concern of some commenters that a five-workdays 
time frame would be unrealistic for developmental activities such as 
training and business seminars, the Department points out that there 
is, in fact, no time frame for developmental activities. Such 
activities are specifically addressed under criterion 1 rather than 
under criterion 2, which contains the business ``visit'' concept.
    Finally, based on considerations of clarity and ease of use of the 
regulations, the Department has determined that the criteria for 
distinguishing between a worksite and a non-worksite should be included 
in the regulatory text which defines the statutory term ``place of 
employment.'' Thus, in this Interim Final Rule, this material appears 
in the regulation at Sec. 655.715, rather than in Appendix B as 
proposed.
c. Under What Circumstances May an H-1B Worker ``Rove'' or ``Float'' 
From His/Her ``Home Base'' Worksite? (NPRM Section P.2 and Proposed 
Appendix B, section b)
    The statute and regulations do not permit the employment of H-1B 
workers as ``roving'' or ``floating'' employees for whom no particular 
LCA, and thus no specific set of LCA requirements, would be applicable. 
However, as explained in the NPRM, the Department recognizes that some 
employers need to move their H-1B workers from place to place in order 
to meet the needs of clients or to respond to business problems and 
opportunities. This practice of moving H-1B workers is sometimes 
described as having the workers ``rove'' or ``float'' from a ``home 
base'' worksite. To assist employers in understanding how this practice 
can be accommodated under the program, Appendix B of the NPRM proposed 
guidance concerning the three circumstances in which an H-1B worker 
could legitimately ``rove'' or ``float'' from his/her home base 
worksite to perform job duties at some other location. This guidance, 
like the other provisions of proposed Appendix B, was initially 
developed as interpretive guidance that the Department had planned to 
issue independently of the regulations.
    The Department received two comments on its proposed guidance.
    AILA urged that the Appendix B guidance be dropped, because it 
considered both the ``rove''/''float'' discussion and the 
interpretation of ``worksite'' to be attempts by the Department ``to 
micromanage employers' commerce'' through ``peculiar workplace rules.''
    ITAA requested clarification concerning the interface between the 
Department and INS policies concerning when an LCA for a ``new'' area 
of employment may be substituted for the ``original'' LCA, and whether 
such a substitution would require the filing of a new petition. The 
Department recognizes that employers need clarity regarding this 
matter, and will consult with the INS with the intention of providing 
official, coordinated guidance.
    The Department has concluded, upon further review, that 
incorporation of the interpretive guidance in proposed Appendix B, 
section b, into the regulation is not necessary or appropriate at this 
time. The Department plans to issue separate interpretive guidance 
explaining the inter-relationship between the various provisions 
regarding employment of 
H-1B nonimmigrant workers outside of their home work station.
2. What Are an Employer's Wage Obligations for an H-1B Worker's 
``Nonproductive Time''? (See IV.H, Above)
3. What Are the Guidelines for Determining and Documenting the 
Employer's ``Actual Wage''? (Appendix A to Subpart H)
    Section 212(n)(1)(A)(i)(I) of the INA as amended by the Immigration 
Act of 1990 (IMMACT 90) and the Miscellaneous and Technical Immigration 
and Naturalization Amendments of 1991 (MTINA) requires that an employer 
seeking to employ H-1B nonimmigrants agree that it will pay the 
nonimmigrants at least the higher of the prevailing wage or the 
``actual wage level paid by the employer to all other individuals with 
similar experience and qualifications for the specific employment in 
question.''
    In explaining the amendments to the H-1B program made by MTINA, 
Senator Reid explained Congress intended ``specific employment to mean 
the specific position held by the H-1B

[[Page 80192]]

worker at the place of employment.'' Furthermore, by ``similar 
experience and qualifications,'' Congress intended consideration of 
``experience, qualifications, education, job responsibility and 
function, specialized knowledge, and other such legitimate factors'' 
137 Cong. Rec. S18243 (Nov. 26, 1991).
    The Department's regulations explaining the ``actual wage'' 
requirement, as amended in 1992 and 1994, provide at Sec. 655.731(a)(1) 
that in determining the actual wage, employers may take into 
consideration experience, qualifications, education, job responsibility 
and function, specialized knowledge, and other legitimate business 
factors. Legitimate business factors are ``those that it is reasonable 
to conclude are necessary because they conform to recognized principles 
or can be demonstrated by accepted rules and standards.'' The actual 
wage is the amount paid to other employees with substantially similar 
experience and qualifications with substantially the same duties and 
responsibilities, or if there are no such employees, the wage paid the 
H-1B nonimmigrant. In addition, the regulation requires that 
adjustments such as cost of living increases or other periodic 
adjustments, higher entry rate due to market conditions, or the 
employee moving into a more advanced level of the occupation, be 
provided to H-1B nonimmigrants where the employer's pay system or scale 
provides for such adjustments during the LCA.
    The regulations further provide at Sec. 655.731(b)(2) that the 
employer shall retain documentation specifying the basis it used to 
establish the actual wage, i.e., showing how the wage for the H-1B 
worker relates to the wages paid other individuals with similar 
experience and qualifications for the specific employment at the place 
of employment. The documentation is also required to show that after 
any adjustments in the employer's pay system or scale, the wage paid is 
at least the greater of the adjusted actual wage or the prevailing 
wage. In addition, the regulations provide at Sec. 655.760(a)(3) that 
the public access file shall contain ``[a] full, clear explanation of 
the system that the employer used to set the `actual wage' * * *, 
including any periodic increases which the system may provide. * * *'' 
This explanation may be in the form of a memorandum summarizing the 
system, or a copy of the pay system or scale. Payroll records do not 
need to be in the public access file, but are required to be made 
available to the Department in an enforcement action.
    The Department initially offered guidance on factors to be 
considered in making this determination, with examples, in the preamble 
to the Interim Final Rule of January 13, 1992 (57 FR 1319). This 
guidance, in modified form, was published as Appendix A to Subpart H in 
the Final Rule of December 20, 1994 (59 FR 65671). In addition to the 
examples set forth in the preamble to the 1992 Interim Final Rule, 
Appendix A provided that the employer may take into consideration 
``objective standards,'' and must ``have and document an objective 
system used to determine the wages of non-H-1B workers.'' The Appendix 
further provided that the explanation of the wage system in the public 
access file ``must be sufficiently detailed to enable a third party to 
apply the system to arrive at the actual wage rate computed by the 
employer for any H-1B nonimmigrant.'' The portions of Appendix A 
relating to an objective wage system were enjoined by the court in NAM, 
for lack of prior notice and comment. In the meantime, the ``Appendix 
A'' guidance was republished for public comment in the Proposed Rule 
dated October 31, 1995 (60 FR 55339).
    The Department republished Appendix A for further notice and 
comment in the 1999 NPRM, as modified to include job performance among 
the legitimate business factors which may be taken into consideration. 
The underlying regulatory provisions at Secs. 655.731(a)(1), 
655.731(b)(2), and 655.760(a)(3) were not open for notice and comment. 
The preamble explained that under Appendix A as proposed, the employer 
would not be required to create or to document an elaborate ``step'' or 
``grid'' type pay system, or any other complex, rigid system. Rather, 
the employer's actual wage system could take into consideration any 
objective, business-related factors relating to experience, 
qualifications, education, specific job responsibilities and functions, 
job performance, specialized knowledge and other business factors. The 
use of any or all of the factors would be at the discretion of the 
employer. All factors used in the employer's actual wage system would 
need to be applied to H-1B nonimmigrant workers in the same, 
nondiscriminatory manner as the factors would be applied to U.S. 
workers in the occupational classification. Further, the preamble 
explained that the explanation of the actual wage system in the public 
access file must be sufficiently detailed to enable a third party to 
understand how the wage system would apply to a particular worker and 
``to derive a reasonably accurate understanding of that worker's 
wage.''
    The Department received nine comments on proposed Appendix A in the 
1995 Proposed Rule, and 15 (including two 1995 commenters) in response 
to the 1999 NPRM. Most 1995 and 1999 commenters viewed the Appendix 
guidance as inconsistent with the INA and demonstrating a lack of 
understanding of corporate pay systems. The comments focused on an 
employer's responsibilities in making the actual wage determination, 
what factors should be considered in making the determination, how the 
factors should be considered, when the factors should be considered, 
and the documentation required to enable a third party to apply the 
wage system to determine the actual wage rate.
    Senators Abraham and Graham, the Congressional commenters, AILA (in 
1995 and 1999 comments), FHCRC, Hammond, Network Appliance, Oracle, 
Rubin & Dornbaum, Sun Microsystems, the Massachusetts Institute of 
Technology (MIT) (1995 comment) and the National Association of 
Manufacturers (NAM) (1995 comment) contended that the INA does not 
require, nor did Congress intend, that employers be required to create 
and document an objective wage system for their U.S. workers to meet 
the requirement to pay H-1B workers no less than the greater of the 
actual or prevailing wage. AILA indicated further that the INA requires 
the actual wage to be paid only to H-1B workers, and does not dictate 
the wages of U.S. workers. NAM indicated that this requirement ignores 
the realities of how businesses establish salaries and epitomizes 
regulatory overreach.
    Several commenters (AILA, ACIP, Kirkpatrick & Lockhart, Latour and 
Sun Microsystems) disagreed with the Appendix A requirement that an 
employer use only objective factors in determining the actual wage 
while others offered suggestions on factors to be considered. 
Kirkpatrick & Lockhart indicated that by limiting this determination to 
objective factors, the Department was eliminating an employer's 
discretion in hiring and ignoring the reality that subjective as well 
as objective factors are evaluated in compensating employees in the 
corporate world. Frost & Jacobs (1995 comment) suggested that the 
Department include ``performance level'' as a legitimate business 
factor in determining actual wage. ITAA agreed with the Department's 
addition of ``job performance'' as an acceptable business factor in the 
January 5, 1999 NPRM.

[[Page 80193]]

    After carefully considering all the comments, the Department has 
concluded that Appendix A--which was created in response to employers' 
requests for technical guidance--has not served its intended purpose 
and has, instead, caused some confusion. The Department has, therefore, 
decided that Appendix A will not be included in the Interim Final Rule. 
The controlling standards for determining and documenting an employee's 
``actual wage'' are contained in the current regulation, 20 CFR 
655.731(a)(1), 655.731(b)(2), and 655.760(a)(3) (none of which were 
opened for comment in the NPRM). If the need arises in the future, the 
Department, as appropriate, will provide compliance advice or technical 
assistance further explaining the current regulation.
    The commenters' reactions to the proposed Appendix A are based, in 
large part, on a lack of understanding of the fact that the 
Department's regulations (20 CFR 655.731(a)(1), 655.731(b)(2), and 
655.760(a)(3))--which the proposed Appendix A was intended to explain 
and clarify--do not direct employers to develop a special corporate-
wide wage system specifically to support the employment of H-1B 
nonimmigrants. The Department agrees with the commenters that section 
212(n)(1)(A)((i)(I) of the INA does not require an employer seeking H-
1B nonimmigrants to create an objective wage system for its U.S. and H-
1B workers. The Department is imposing no obligation to create such a 
system.
    Section 655.760(a)(3) requires that the factors used be legitimate 
business factors such as experience, qualifications, education, 
specific job responsibilities and functions, specialized knowledge, and 
job performance. The use of any or all of these factors is at the 
discretion of the employer. Whatever factors are used in the employer's 
actual wage system must be applied to H-1B nonimmigrant workers in the 
same, nondiscriminatory manner that they are applied to U.S. workers. 
Furthermore, the factors applied must relate to the statutory standard, 
i.e., the workers' experience, qualifications, and job duties. 
Accordingly, it is the Department's position that an employer may not 
differentiate between the pay of H-1B and U.S. workers based on market 
forces, such as the lowest wage a worker is willing to accept. 
Similarly, it is inappropriate for an employer to consider factors 
which are not relevant to the job and which are not uniformly applied 
to H-1B and U.S. workers.
    The Appendix A guidelines were drafted under the presumption that 
all U.S. businesses use wage systems to determine professional salaries 
that consider various legitimate business factors. The Department 
drafted Appendix A to limit the actual wage determination to objective 
legitimate business factors already being used by the employer because 
such factors could reasonably be used by the Department in its 
enforcement to compare H-1B nonimmigrant and U.S. workers in the 
specific employment in question. Although the Department remains 
concerned about the inherent difficulty in comparing the pay of workers 
based on subjective factors, it is persuaded that some subjective 
factors, such as an evaluation of performance levels, may be legitimate 
business factors used in setting the actual wage. However, pursuant to 
Sec. 655.760(a)(3), the employer continues to be required to describe 
the wage system it used to determine the actual wage paid to H-1B 
nonimmigrants.
    AILA and NAM (1995 comments) disagreed with the requirement that an 
employer establish the actual wage based on the ``occupation'' in which 
the H-1B nonimmigrant is employed. The commenters stated that the 
statute requires that H-1B workers be paid at least (the greater of the 
prevailing or) actual wage of those with similar qualifications and 
experience employed in the ``specific employment'' in question, a 
smaller group than dictated by the NPRM. Therefore AILA suggested that 
employers should be required to analyze which jobs are comparable for 
actual wage purposes, and pay the H-1B worker at least as much as the 
employees in those jobs.
    The Department agrees that an employer must determine which workers 
are the subject of comparison with the H-1B worker in order to 
determine the actual wage required to be paid, at a minimum, to the H-
1B worker. The Department also agrees that the appropriate actual wage 
determination comparison for H-1B nonimmigrants is to ``individuals 
with similar experience and qualifications for the specific employment 
in question'' and not ``occupation.'' However, in many circumstances 
this comparison can only be made if the Department is able to review 
the employer's compensation system for employees in the occupational 
category, since the employer's compensation system for other employees 
in the same occupation bears directly on determinations of the actual 
wage required to be paid for the specific employment in question.
    Intel (1995 comments) and Microsoft (1995 comments) suggested that 
the Department allow blanket approval--as meeting actual wage 
requirements--for large employers with established ``total 
compensation'' wage systems which meet certain requirements such as 
executive bonuses and profit sharing supplements to base salary. The 
Department disagrees with this suggestion. The Department is charged 
with enforcement of the statutory requirement that the employer pay the 
H-1B worker(s) the higher of the actual or prevailing wage. Such 
enforcement includes a determination that H-1B workers have, in fact, 
been paid at least the actual wage paid to other workers with similar 
experience and qualifications for the specific employment--a 
determination that can only be made through an examination of the 
application of the employer's actual wage system. Furthermore, it would 
be inappropriate for the Department to make exceptions for large 
employers; the statute indicates no Congressional intent for differing 
obligations for employers depending upon the size of their workforce or 
the sophistication or apparent generosity of their compensation 
systems.
    AILA (1995 comments) and NAM (1995 comments) asked how the 
Department can determine the actual wage in the absence of 
documentation by using an average (as stated in the preamble to the 
1995 NPRM, 60 FR 55341), when the express language of the regulation is 
that the actual wage is not an average. AILA recommended that if the 
Department is allowed to use an average to compute the actual wage, 
employers should be able to use an average as well.
    The Department is unable to accommodate the recommendation that 
employers be authorized to compute the actual wage by averaging the 
wages paid to employees. As stated in the preamble to the 1995 Proposed 
Rule, the actual wage is not an average. It reflects application of an 
employer's actual pay system. Use of the average by the employer would 
not satisfy the statutory requirement. However, the Department must 
have some method of determining the actual wage and calculating any 
back wages due H-1B workers if the employer has not documented and 
cannot reconstruct its actual wage system. In such circumstances, 
averaging the wages of non-H-1B workers may be an enforcement method of 
last resort. The Department would identify U.S. workers in the specific 
employment in question with experience and qualifications similar to 
the H-1B nonimmigrant and average their wages to determine the actual 
wage back wage assessment.

[[Page 80194]]

    ITAA requested that an employer be permitted to set an actual wage 
range for a particular position, even if some H-1B workers with similar 
skills and education make more than others, as long as the workers are 
paid within the range and meet the prevailing wage requirement.
    The Department agrees that an actual wage range can be used to 
determine compliance with the actual wage requirement, provided the 
employer's methodology in assigning wages within the range is based on 
acceptable, legitimate business factors and the methodology is applied 
in the same manner to H-1B nonimmigrants and U.S. workers. This should 
result in U.S. workers and H-1B workers with similar skills and 
qualifications being paid the same, where their duties and 
responsibilities are the same.
    MIT (1995 comments), AILA (1995 comments), NAM (1995 comments), 
Microsoft (1995 comments), CBSI (1995 comments), Intel, and Rubin & 
Dornbaum objected to the requirement to update and document changes to 
the actual wage when the employer's pay system or scale provides for 
pay adjustments during the validity period of the LCA. They stated that 
Section 212(n)(1)(A)(i) of the INA directs that the required wage rate 
determination be ``based on the best information available as of the 
time of filing the application;'' thus an actual wage update should be 
required only at the time of filing the LCA. AILA further stated that 
to require constant reconsideration of the actual wage (like the 
prevailing wage) would be a massive burden on employers which Congress 
did not intend to impose.
    The Department notes that the INA language referred to in the 
comments was included in the Miscellaneous and Technical Immigration 
and Naturalization Amendments of 1991 (MTINA), Public Law 102-232, 105 
Stat. 1733, and refers to the sources of wage information (``the best 
information available'') that an employer may use when reporting the 
appropriate wage on its LCA. 137 Cong. Rec. S18243 (Nov. 26, 1991) 
(Statement of Senator Simpson). As Senator Simpson stated, with the 
enactment of MTINA, employers were no longer required ``to use any 
specific methodology to determine that the alien's wage complies with 
the wage requirements of the Act and may utilize a State agency 
determination, such as SESA, an authoritative independent source, or 
other legitimate sources of wage information.''
    The Department's interpretation of an employer's actual wage 
obligation as an ongoing, dynamic obligation has been the Department's 
position since the inception of the H-1B program, as provided by 
Sec. 655.731(a)(1) of the existing regulations (which were not open for 
notice and comment). The regulation explains that the actual wage 
obligation includes adjustments in the actual wage. In response to 
comments on the 1993 NPRM expressing concern that infrequent prevailing 
wage updates would allow an employer to use ``stale'' wage data, the 
Department stated in the preamble to the December 20, 1994 Final Rule 
(59 FR 65654): ``[T]he ``actual wage rate'' has been and will continue 
to be a ``safety net'' for the H-1B nonimmigrant. Assuming the actual 
wage is higher than the prevailing wage and thus is the required wage 
rate, if an employer normally gives its employees a raise at year's 
end, or the employer's system provides for other adjustments, H-1B 
nonimmigrants must also be given the raise (consistent with employer-
established criteria such as level of performance, attendance, etc.).'' 
Conversely, if no raises, bonuses, or other updates are provided U.S. 
workers throughout the life of the LCA, the 
H-1B worker is not entitled to such payments or adjustments. The 
Department's interpretation furthers the Congressional intent of parity 
in wages and benefits for U.S. workers and H-1B nonimmigrants.
    Several commenters (Microsoft (1995 comment), Motorola (1995 
comment), Coopers & Lybrand (1995 comment), ITAA, Intel, ACIP, and AILA 
expressed strong concern over the requirement that the employer's 
compensation system be sufficiently detailed and documented in the 
public access file to enable a third party to apply the system to 
arrive at the actual wage. The commenters contended that such a 
requirement is unrealistic and imposes an impossible burden on 
employers. Microsoft (1995 comment) recommended that the pertinent 
portion of Appendix A be revised to read: ``The explanation of the 
compensation system should be sufficiently detailed to illustrate to a 
third party, in the event of an enforcement action, how the employer 
applied the system to arrive at the actual wage for an H-1B 
nonimmigrant.'' MIT (1995 comment) agreed with the requirement of an 
equitable wage system for all employees, and recommended that the 
wording of the provision be changed to indicate that only a general 
explanation of the compensation system be provided. Similarly, Intel 
recommended that the employer be required to provide a general 
description of its compensation system sufficient to enable a third 
party to clearly understand how wages were determined. Intel also 
stated that it was unclear whether the employer had to do a detailed 
analysis for each LCA or an overview of the compensation system to 
support the third party review. ACIP and AILA indicated that it was 
unrealistic to expect a third party to be able to calculate a 
particular worker's salary based on the employer's documentation of its 
actual wage system. ACIP was troubled that an employer could be 
debarred for having inadequate documentation and urged the Department 
to eliminate or simplify this requirement. AILA recommended that 
employers should make the analysis of comparable employee, decide the 
appropriate documentation of the analysis, and leave the rest to 
enforcement.
    The Department is persuaded that its proposed Appendix A 
requirement for a public access file with the detail sufficient to 
enable a third party to determine the actual wage rate for an 
H-1B nonimmigrant is an impractical requirement for employers. The 
explanation of the compensation system found in the public access file 
must be sufficiently detailed for a third party to understand how the 
employer applied its pay system to arrive at the actual wage for its H-
1B nonimmigrant(s). It is the Department's view that although third 
parties may not have the information needed to arrive at the specific 
actual wage for the H-1B nonimmigrant(s), the information should be 
sufficient to allow them to make a judgement on the potential for an 
actual wage problem. At a minimum, the description of the actual wage 
system in the public access file should identify the business-related 
factors that are considered and the manner in which they are 
implemented (e.g., stating the wage/salary range for the specific 
employment in the employer's workforce and identifying the pay 
differentials for factors such as education and job duties). 
Computation of U.S. and H-1B workers' particular wages need not appear 
in the public access file; that information must be available for 
review by the Department in the event of an enforcement action (such as 
in each worker's personnel file maintained by the employer).
4. What Records Must the Employer Keep Concerning Employees' Hours 
Worked? (Sec. 655.731(b)(1))
    The Department sought further comment on proposed amendments to 
Sec. 655.731(b)(1), the basic recordkeeping obligation to support an 
employer's

[[Page 80195]]

wage obligation. This provision was published for comment in the 
Proposed Rule dated October 31, 1995 (60 FR 55339). An earlier 
amendment to Sec. 655.731(b)(1) was promulgated in the Department's 
Final Rule of December 20, 1994 (59 FR 65646), which was enjoined by 
the court in NAM, for lack of prior notice and comment.
    The proposed regulation would require employers to keep specified 
payroll records for H-1B workers and ``for all other employees for the 
specific employment in question at the place of employment.'' Hours 
worked records would be required if (1) the employee is not paid on a 
salary basis, (2) the actual wage is expressed as an hourly rate, or 
(3) with respect to H-1B workers only, the prevailing wage is expressed 
as an hourly rate.
    The Department has made a number of accommodations already to 
concerns expressed regarding the requirements of this rule, 
particularly in regard to the circumstances in which hours worked 
records must be maintained. Therefore a detailed rulemaking history is 
useful.
    The regulations currently in effect at 20 CFR 655.731(b)(1) (1993) 
(i.e., the regulations which are not under injunction), require that 
payroll records be maintained for H-1B workers and for ``all other 
individuals with experience and qualifications similar to the H-1B 
nonimmigrant for the specific employment in question at the place of 
employment.'' Hours worked records are required if the employee is paid 
on other than a salary basis, or if the prevailing wage or actual wage 
is expressed as an hourly wage.
    The 1994 Final Rule (set forth in the CFR, but enjoined in NAM), 
like the current NPRM, required that an employer maintain payroll 
records for H-1B workers and for ``all other employees for the specific 
employment in question at the place of the employment.'' Upon further 
consideration, the Department issued a Notice of Enforcement Position 
(60 FR 49505, September 26, 1995) announcing that, with respect to any 
additional workers for whom the Final Rule may have applied 
recordkeeping requirements (i.e., U.S. workers in the specific 
employment in question who did not have similar qualifications and 
experience), the Department would enforce the provision to require the 
employer to keep only those records which are required by the Fair 
Labor Standards Act (FLSA), 29 CFR Part 516. The Department concluded 
that, in virtually all situations, the records required by the FLSA 
would include those listed under the H-B Final Rule.
    In the October 1995 NPRM, the Department proposed to require 
employers to retain records of hours worked for all employees in the 
same specific employment as the H-B worker if (1) the employee is not 
paid on a salary basis, (2) the actual wage is expressed as an hourly 
rate, or (3) with respect to H-1B workers only, the prevailing wage is 
expressed as an hourly rate. Thus unlike the rule currently in effect 
(or the final rule enjoined in NAM), where the actual wage is expressed 
as a salary but the prevailing wage is expressed as an hourly wage, 
hourly records would not be required for U.S. workers in the specific 
employment question.
    The January 1999 NPRM was identical to the October 1995 proposed 
rule, as described above.
    The Department received one comment on the proposed modification of 
the documentation requirements in response to the 1995 NPRM and five 
additional comments in response to the 1999 NPRM.
    A law firm (Moon) (1995 comment) commended the Department for 
``revising the recordkeeping requirement to release employers from any 
obligation to keep records of hours worked by FLSA-exempt [U.S.] 
employees.'' At the same time, it criticized the proposal insofar as it 
requires records to be kept for FLSA-exempt H-1B workers where the 
prevailing wage is expressed as an hourly rate--a requirement it 
characterized as artificial and inconsistent with traditional FLSA 
principles. The firm recommended that the Department instead require 
SESAs to issue prevailing wage determinations on a salaried basis for 
exempt workers.
    Intel asserted that all of its H-1B workers are paid on a salary 
basis (and apparently are listed as such on their LCAs); Intel noted, 
however, that SESAs sometimes issue rates on an hourly basis and 
suggested that the rule be clarified so that this alone would not 
trigger a recordkeeping requirement. Intel and ACIP both suggested that 
the provision should be modified to make plain that such records need 
be kept only where an employer includes an hourly rate on an LCA. ACIP 
stated that it should not matter if the SESA lists the rate as an 
hourly wage. It further argued that if recordkeeping is required in all 
instances where a SESA issues an hourly rate, this requirement would 
``muddy up'' the FLSA-status of the workers. Another commenter (Rubin) 
expressed similar concerns, stating that considerable paperwork will be 
generated if recordkeeping is triggered simply because a SESA, without 
regard to the practice within a profession, issues a rate as an hourly 
wage.
    The Department appreciates the concern expressed by commenters that 
SESAs sometimes issue hourly rates for certain occupations without 
regard to whether workers are commonly paid on a salary basis or the 
FLSA-exempt nature of the job. The Department notes that while SESAs 
ordinarily base prevailing wage determinations on the U.S. Bureau of 
Labor Statistics, Occupational Employment Statistics survey (OES), 
which are generally expressed as an hourly wage, the SESAs will issue 
the prevailing wage as a salary rate upon request. In addition, to 
alleviate the concerns of employers and to avoid confusion with regard 
to the nature of the prevailing wage or recordkeeping obligations, the 
Department is modifying Sec. 655.731(a)(2) to expressly authorize the 
employer to convert the prevailing wage determination into the form 
which accurately reflects the wage which it will pay (i.e., where the 
prevailing wage is expressed as an annual ``salary,'' it may be 
converted to an hourly rate by dividing the amount by 2080; where the 
prevailing wage is expressed as an hourly rate, it may be converted to 
a salary by multiplying the amount by 2080). The modified regulation 
instructs that the employer shall state the prevailing wage on the LCA 
in the manner in which the wage will be paid, i.e., as an hourly rate 
or a salary. However, the prevailing wage must be expressed as an 
hourly wage if the worker is part-time, in order to ensure that the 
part-time worker is in fact paid for the proportion of the week in 
which he or she actually works.
    In addition, after review, the Department has concluded that a 
further revision of the regulation is appropriate to remove the 
requirement that an employer keep hourly wage records for its full-time 
H-1B employees paid on a salary basis. (Employers are also directed to 
Sec. 655.731(a)(4) (not revised in this rule), which explains payment 
of wages to employees paid on a salary basis.) The regulation continues 
to require employers to keep hours worked records for part-time 
employees, as well as hourly employees. It is the Department's view 
that there is no other way to ensure that employers comply with their 
obligation to pay these workers at least the prevailing wage for all 
hours worked. Otherwise, for example, an employer would be able to 
state on its H-1B petition that an employee will be paid 20 hours per 
week, pay the employee an annual salary based on 20 hours per week, 
keep no record of hours worked, and actually

[[Page 80196]]

work the employee 30 hours a week. In any event, the Department 
believes that most employers keep hours worked records for their part-
time employees.
    Another commenter (Latour) agreed that it was reasonable for DOL to 
require the retention of the records enumerated in the proposal, which 
it stated were records kept by typical employers. However, it expressed 
concern over a perceived requirement that all the documentation must be 
included in the public access file. Another commenter (Baumann) 
expressed concern over the requirement that the records be kept 
beginning with the date the LCA is submitted throughout the period of 
employment. This commenter stated that the proposal, read in the 
broadest sense, requires an employer to continue to update the public 
access file each time a new worker is hired or a current employee 
receives a pay increase. He requested the Department to make clear that 
the wage information relating to non-H-1B workers is limited to the 
period before the filing of the LCA.
    It appears that these commenters have misunderstood the 
documentation requirement as it relates to the public access file. The 
basic payroll information required to be maintained does not need to be 
included in the public access file, but rather must be available to the 
Wage and Hour Division in the event of an investigation. As provided in 
Sec. 655.760(a), the public access file is required to contain only the 
wage rate to be paid the H-1B workers, an explanation of the employer's 
actual wage system (discussed in IV.O.3, above), and the documentation 
used to establish the prevailing wage.
5. What Are the Requirements for Posting of ``Hard Copy'' Notices at 
Worksite(s) Where H-1B Workers Are Placed? (See IV.F, above)
6. What Are the Time Periods or ``Windows'' Within Which Employers May 
File LCAs? (Sec. 655.730(b) and Sec. 655.731(a)(2)(iii)(A)(1))
    Regulations with respect to the time periods or ``windows'' within 
which employers may file labor condition applications were first 
published by the Department as Secs. 655.730(b) and 
655.731(a)(2)(iii)(A)(1) in the December 20, 1994 Final Rule. That rule 
provides at Sec. 655.730(b) that ``a labor condition application shall 
be submitted * * * no earlier than six months before the beginning date 
of the period of intended employment shown on the LCA.'' Section 
655.731(a)(2)(iii)(A)(1) states that ``[a]n employer who chooses to 
utilize a SESA prevailing wage determination shall file the labor 
condition application not more than 90 days after the date of issuance 
of such SESA wage determination.''
    These provisions were challenged in the NAM litigation as violative 
of the notice and comment provision of the APA, 5 U.S.C. 553(b)(3). The 
district court in NAM, however, concluded that Secs. 655.730(b) and 
655.731(a)(2)(iii)(A)(1) ``lie on the procedural side of the spectrum 
and are exempt from the notice and comment requirement of the APA.'' 
The court further found that the ``plaintiff has failed to demonstrate 
that the two time periods are so short that they encroach upon an 
employer's ability to utilize the H-1B workers, and plaintiff has 
failed to show that the rules alter any substantive standard by which 
[the Department] will evaluate LCAs.'' Therefore these rules are 
currently in effect.
    On October 3, 1995, during the pendency of the NAM litigation, the 
Department republished these sections for comment. The 1999 NPRM 
republished these sections for comment without modification.
    Six commenters (Intel, CBSI, Motorola, Moon, AILA, MIT) responded 
to the republication of these sections in the 1995 Proposed Rule. With 
respect to the requirement that an LCA be filed within 90 days of 
issuance of a SESA prevailing wage determination, all six commenters 
asserted that the requirement would make more work for employers and 
that it would slow down the LCA process. Two of these commenters (CBSI, 
MIT) also suggested that the validity period of a SESA determination 
should be 180 days, and one commenter (Moon) suggested that SESA 
determinations should carry no expiration date.
    Three commenters (AILA, BRI, ITAA) responded to these sections as 
republished in the 1999 NPRM. ITAA supported the provision permitting 
employers to file LCAs up to six months before the beginning date of 
the period of intended employment as shown on the LCA, stating the 
proposal reflected an ``appropriate balance'' of the Department's and 
business interests. One commenter (BRI) sought clarification on whether 
an LCA already certified could be used any time during the validity of 
the LCA, assuming the prevailing wage was obtained from a source other 
than a SESA.
    AILA objected to the 90-day validity period for the SESA prevailing 
wage as arbitrary and--because most U.S. employers make annual wage 
assessments--unrelated to the ``real world wage.'' Therefore, AILA 
asserted, requesting a prevailing wage from the SESA every 90 days 
places an undue burden on U.S. employers. AILA recommended that SESA 
prevailing wages should be valid for a period of one year, based on the 
observation that SESAs rely on the OES survey--an annual survey--to 
obtain wage information for purposes of issuing prevailing wage 
determinations.
    The Department has considered the comments offered in response to 
its proposals regarding the time frames in which LCAs may be filed by 
employers.
    Because there has been no objection to the requirement of 
Sec. 655.730(b) that an LCA be filed within six months of the beginning 
date of intended employment, the Department will adopt that regulation 
as proposed.
    With regard to the length of the ``validity period'' of SESA-issued 
wage determinations--the period during which the determination may be 
used by an employer to support a visa petition--the Department has 
concluded that the proposed rule can be modified to accommodate the 
views of the commenters, while maintaining the crucial principle that 
prevailing wage determinations should reflect rates which are current 
and accurate for the locality and the occupational classification. The 
Interim Final Rule therefore provides that the SESA's issuance of a 
prevailing wage determination shall include a specification of a 
validity period, which shall be not less than 90 days and not more than 
one year from the date of the issuance. The Department will provide 
guidance to the SESAs with regard to their assignment of validity 
periods. The Department notes that the Bureau of Labor Statistics' 
Occupational Employment Statistics (OES) survey and most employer-
provided surveys are updated on a regular basis, and the update cycles 
for such surveys can be readily determined--unlike the update cycle for 
prevailing wages based on Service Contract Act and Davis-Bacon wage 
determinations or collective bargaining agreements. The Department 
anticipates that the validity period will be 90 days where the wage 
rate is based on SCA, Davis-Bacon, or collective bargaining agreements. 
The Department anticipates that where the wage rate is based on the OES 
survey or on a survey provided by the employer and found acceptable by 
the SESA, the validity period will ordinarily be until the next update, 
provided it is at least 90 days and no more than one year from the date 
of issuance. This will reduce the burden of employers and SESAs in 
filing and responding to wage determinations without any adverse affect 
on worker wages.

[[Page 80197]]

7. How May an Employer Challenge a SESA/ES-Issued Prevailing Wage 
Determination? (Sec. 655.731(a)(2)(iii)(A)(1) and (d)(2), 
Sec. 655.840(c))
    H-1B regulations specifically explaining the procedures available 
to employers to challenge a SESA-issued prevailing wage determination 
were first published by the Department in the December 1994 Final Rule. 
That rule provides at Secs. 655.731(a)(2)(iii)(A)(1), 655.731(d)(2) and 
655.840(c) that irrespective of whether the wage determination is 
obtained by the employer prior to filing the LCA or by the Wage and 
Hour Division in an enforcement proceeding, employers must assert any 
challenge to the wage determination under the Employment Service (ES) 
complaint system at 20 CFR part 658, Subpart E, rather than in an 
enforcement proceeding before the Office of Administrative Law Judges 
pursuant to Subpart I of part 655. Furthermore, pursuant to 
Sec. 655.731(a)(2)(iii)(A)(1), an employer which wishes to appeal a 
SESA-issued wage determination must file the appeal and obtain a final 
ruling pursuant to the ES complaint system prior to filing any LCA 
based on that determination. Section 655.731(d)(2) provides that where 
a prevailing wage determination is obtained by Wage and Hour pursuant 
to Sec. 655.731(d)(1), an employer must file any appeal within 10 days 
of receipt of the wage determination; notwithstanding the provisions of 
Secs. 658.420 and 658.426, the appeal is filed directly with ETA, 
rather than with the SESA.
    These provisions of the 1994 Final Rule were challenged in the NAM 
litigation as contrary to the requirements of the APA. The court, in 
that matter, concluded that these provisions were procedural 
regulations, exempt from APA notice and comment requirements, and 
further found that the plaintiffs in that case had failed to 
demonstrate that an employer's substantive rights had been altered by 
these provisions. Accordingly, the regulations were not enjoined and 
remain in effect. During the pendency of that litigation, these 
provisions were republished for notice and comment in the October 1995 
Proposed Rule. The identical provisions were republished for notice and 
comment in the January 1999 Proposed Rule.
    The Department received five comments (AILA, Frost & Jacobs, Moon, 
Motorola, NAM) in response to the proposals republished in 1995. All 
commenters opposed the proposed provisions. One commenter (Moon) 
asserted that the ES system was inadequate because it ``handcuffs the 
employer by gagging the SESA from revealing information.'' The 
commenter was alluding to the language in Sec. 655.731(d)(2), which 
states that neither ETA nor the SESA may divulge any employer wage data 
which was collected under the promise of confidentiality. Another 
commenter (Frost & Jacobs) urged that any challenge of a SESA 
determination be required to be resolved by the ES in a timely manner 
(recommended 30-day time limit). Motorola was also concerned with the 
ability of the ES to timely respond to SESA challenges, especially in 
situations of H-1B visa extensions or changes in status from an F-visa 
to an H-1B. In these situations, this commenter noted, an employer is 
forced to accept the challenged wage in order to obtain the LCA so that 
the application may be filed with the INS in sufficient time to prevent 
removing an individual from the payroll for lack of work authorization.
    In their comments to the 1995 proposals, NAM and AILA contended 
that allowing challenges to prevailing wage determinations to be made 
only pursuant to the ES complaint system deprives employers of their 
procedural due process protections. These organizations commented that 
a paper appeal to an administrative agency, staffed by paid employees 
of the very agency which determined the prevailing wage, without any 
rights to discovery, an examination of the evidence in support of the 
wage determination, or an express written decision, does not substitute 
for the right to be heard by an independent ALJ where all of these 
rights are guaranteed.
    The 1999 NPRM republication of the 1995 proposals on this issue 
sought further comment on these proposals. AILA, the sole commenter on 
this issue, stated that a poll of its members revealed that the 
complaint process is rarely used because of failure by either the ES or 
SESA Prevailing Wage Unit to publicize it. AILA further criticized the 
complaint system as laborious, complicated and protracted, requiring 
handling by several different offices of the SESA and ETA. Furthermore, 
the opportunity for a hearing before a DOL administrative law judge is 
permitted only at the discretion of the ETA Regional Administrator. 
AILA stated that without the opportunity for meaningful review of a 
SESA wage determination by an impartial judicial tribunal, such as in 
an ALJ hearing, employers feel that a meaningful and fair review might 
not be possible under the ES complaint system.
    The Department continues to be of the view, as stated in the 
preamble to the December 1994 Final Rule, that ``permitting an employer 
to operate under a SESA prevailing wage determination and later 
contesting it in the course of an investigation or enforcement action 
is contrary to sound public policy; such a delayed disruptive challenge 
would have a harmful effect on U.S. and H-1B employees, competing 
employers, and other parties who may have received notice of and/or 
relied on the prevailing wage at issue.''
    Challenges to SESA prevailing wage determinations prior to filing 
the LCA (as distinguished from challenges to prevailing wage 
determinations obtained by Wage and Hour) must be made through the ES 
complaint system by filing a complaint with the SESA. However, it 
should be clarified that complaints need not be initiated at the ES 
local office level. The complaint may be filed directly with the 
organization within the SESA responsible for alien labor certification 
prevailing wage determinations. This office is usually part of the 
central state office. Since the implementation of the OES program, SESA 
local offices are not involved in making or issuing prevailing wage 
determinations. See ETA's General Administrative Letter 2-98 (October 
3, 1997).
    Furthermore, although the regulations at Sec. 658.421(h) provide 
that the offer of a hearing before an administrative law judge is 
discretionary, it is ETA's policy that where the employer is appealing 
a wage determination obtained by Wage-Hour pursuant to Sec. 655.731(d), 
the ETA Regional Administrator will offer a hearing before an 
Administrative Law Judge in every H-1B case which is not resolved to 
the employer's satisfaction.
    With regard to comments that challenges to a SESA prevailing wage 
determination should be resolved more expeditiously, the Department 
believes that allowing employers to initiate a challenge to the a SESA 
prevailing wage determination at the State rather than the local office 
level will simplify and reduce the time necessary to resolve those 
complaints. The regulations governing the ES complaint system provide 
that if the complaint has not been resolved within 30 working days the 
State office shall make a written determination. Furthermore, appeals 
to wage determinations obtained by Wage-Hour are filed directly with 
the ETA Regional Administrator, thus shortening the process.
    As indicated above, one commenter to the 1995 Proposed Rule 
objected to the provision at Sec. 655.731(d)(2) which

[[Page 80198]]

states, in relevant part, that neither ETA nor the SESA shall divulge 
any employer wage data which was collected under the promise of 
confidentiality. This regulatory provision prohibiting release of wage 
information codified a longstanding ETA policy of not releasing such 
information because release of such information would inhibit employers 
responding to SESA conducted prevailing wage surveys. Furthermore, 
since January 1998, SESAs, pursuant to ETA's General Administrative 
Letter 2-98 (October 3, 1997), have based their prevailing wage 
determinations on the wage component of the Bureau of Labor Statistics' 
expanded Occupational Employment Statistics (OES) program. The 
occupational employment statistics questionnaire used to conduct 
occupational employment surveys informs potential respondent employers 
that ``[t]he Bureau of Labor Statistics and the State agency collecting 
this information will use the information you provide for statistical 
purposes only and will hold the information in confidence to the full 
extent permitted by law.'' This statement reflects longstanding BLS 
policies and practices, as well as longstanding ETA policies and 
practices, which are essential to obtain the information needed to 
provide timely and accurate statistics to the public. Accordingly, the 
Department is leaving unchanged the provision at Sec. 655.731(d)(2) 
which states that in a challenge to a SESA wage determination ``neither 
ETA nor the SESA shall divulge any employer wage data which was 
collected under the promise of confidentiality.''
    AILA has maintained that one reason that the ES complaint system 
has not been widely used is that it has not been widely publicized; 
AILA contends that despite the stated obligation at 20 CFR 658.410(d), 
not all State agencies have publicized the use of the ES complaint 
system through the prominent display of an ETA-approved ES complaint 
system poster in each local office. ETA operating experience indicates 
that a failure to display an ETA-approved ES complaint system poster in 
each local office is a rare occurrence. Such a failure would be a basis 
for a complaint about ES actions or omissions under ES regulations (20 
CFR 658.401). Further, the availability of the ES complaint to 
challenge SESA prevailing wage determinations issued under the H-1B 
program is clearly set forth in the H-1B regulations.
    The Department has concluded that at this time further measures to 
streamline the complaint process for challenging SESA prevailing wage 
determinations are not warranted. The basic structure of the current 
system appears to be adequate in view of the few complaints (about six) 
concerning SESA wage determinations that have been received and 
processed since publication of the 1994 Final Rule. On review, however, 
the Department has concluded that classification determinations, 
including specifically whether an employee is properly classified as an 
experienced or inexperienced worker, are properly the subject of ALJ 
enforcement proceedings pursuant to part 655, subpart I, since a 
determination of whether an employee has been appropriately classified 
can best be determined upon a review of the actual duties performed by 
the employee. Accordingly, Secs. 655.731(a)(2)(iii)(A)(1) and (3), and 
655.731(d)(2)(ii), are revised to remove references to determinations 
by the SESA or the ETA Regional Administrator regarding occupational 
classification.

P. What Additional Interpretative Regulations Did the Department 
Propose?

    The Department proposed a new Appendix B to the regulations in 
order to explain the Department's interpretation of several provisions 
of the regulations which were not themselves open for notice and 
comment. As the Department stated in the NPRM, these interpretations 
concerned questions that had arisen in its administration of the 
program and had been discussed with interest groups. It was the 
Department's view that because of the interest raised over these 
questions, its interpretations should be included in the regulations, 
either as an appendix or as regulatory text. As discussed below, on a 
number of the issues, the provisions have been removed from Appendix B 
into the regulations.
1. What Constitutes an H-1B Worker's ``Worksite'' or ``Place of 
Employment'' for Purposes of the Employer's Obligations Under the 
Program? (See IV.O.1.b, Above)
2. Under What Circumstances May an H-1B Worker ``Rove'' or ``Float'' 
From His/Her ``Home Base'' Worksite? (See IV.O.1.c, Above)
3. What H-1B Related Fees and Costs Are Considered To Be an Employer's 
Business Expenses? (Sec. 655.731(c)(9)(ii)&(iii), Previously in 
Proposed Appendix B, Section c)
    Section 655.731(c)(7)(iii)(C) of the current regulations excludes 
from deductions which are authorized to be taken from the required wage 
those deductions which are a recoupment of the employer's business 
expenses. Paragraph (c)(9) further explains that where the imposition 
of the employer's business expense(s) on the H-1B worker has the effect 
of reducing the employee's wages below the required wage (the 
prevailing wage or actual wage, whichever is greater), that will be 
considered an unauthorized deduction from wages. These provisions were 
not open for notice and comment.
    The Department sought comment on proposed Appendix B, which 
explains its interpretation of the operation of these provisions in the 
context of the H-1B petition process. The NPRM notes that the filing of 
an LCA and the filing of an H-1B petition are legal obligations 
required to be performed by the employer alone (workers are not 
permitted to file an LCA or an H-1B petition). Therefore the NPRM 
provides that any costs incurred in the filing of the LCA and the H-1B 
petition (e.g., prevailing wage survey preparation, attorney fees, INS 
fees) cannot be shifted to the employee; such costs are the sole 
responsibility of the employer, even if the worker proposes to pay the 
fees.
    The NPRM further notes that bona fide costs incurred in connection 
with visa functions which are required by law to be performed by the 
nonimmigrant (e.g., translation fees and other costs relating to visa 
application and processing for prospective nonimmigrant residing 
outside of the United States) do not constitute an employer's business 
expense. The Department stated, however, that it would look behind what 
appear to be contrived allocations of costs.
    The Department received 21 comments on this issue. All of the 
commenters (a number of whom were attorneys commenting only on this 
issue) opposed the Department's position in the NPRM. As a general 
matter, these commenters contended that the question of how fees are 
allocated between the employer and the H-1B worker is a question which 
should be decided between the employer and the employee.
    Immigration attorneys and their professional association (AILA), as 
well as Senators Abraham and Graham, argued that the Department is 
interfering with the H-1B workers' right to counsel. AILA argued that 
how the H-1B petition is drafted is critical to an employee, since it 
may affect his or her maintenance of status and ability to stay in the 
United States. Another attorney (Freedman) stated that attorney 
representation of the alien has acted as a buffer against employer 
abuses, that there is no reason to imply that an

[[Page 80199]]

attorney representing an employer is more competent or more impartial 
than an attorney suggested by an alien, and that employers may not be 
aware of the expertise necessary to file H-1B petitions. This attorney 
also suggested that the requirement that employers pay attorney fees 
would intimidate a potential whistleblower.
    Many commenters (AILA, ACIP, and a number of attorneys, businesses 
and trade associations) argued, in effect, that since Congress, in 
drafting the ACWIA, specifically prohibited employers from imposing the 
additional petition fee on employees, the failure to prohibit the 
payment of other expenses by employees evidences an intention to allow 
their imposition by an employer.
    ITAA and ACIP argued that the current law is directed toward 
prohibiting certain deductions from an employee's salary that will push 
it below the required wage rate. In other words, as long as the H-1B 
worker receives at least the required wage, it should not be a 
violation if the worker then spends that money for job-related matters 
such as fees. ACIP and ITAA stated that as a minimum, if the H-1B 
worker's wages minus the expenses equals or exceeds the required wage 
rate, there should be no violation. Latour agreed with the Department 
that if an H-1B worker's wage is below the prevailing wage, it would be 
a violation to deduct attorney fees from the worker's compensation, but 
stated that there is no basis for prohibiting the employer from having 
the employee handle the payment if the fees, when subtracted from the 
worker's pay, would not result in compensation less than the prevailing 
wage.
    BRI pointed out that many employers provide payment of immigration 
expenses as a benefit to employees. Making it mandatory that all 
employers pay such fees will disadvantage those employers who offer 
payment of fees as a benefit. BRI also suggested that employer payment 
of fees would make H-1B workers more likely to take advantage of the 
system.
    ACIP, AILA, and ITAA asserted that an employer should be able to 
collect these expenses as liquidated damages if the H-1B nonimmigrant 
prematurely terminates an employment contract. One attorney (Freedman) 
contended that by listing attorney fees as an employer business 
expense, the Department was establishing a regulatory basis for 
repayment as liquidated damages--thereby promoting the abusive actions 
for which the ACWIA was enacted.
    Educational and research institutions (ACE, AIRI, University of 
California, Johns Hopkins) noted that the INS has determined that 
because ACWIA has allowed an exemption from the additional fee for H-1B 
petitions from higher education institutions, affiliated or related 
research institutions, and nonprofit and governmental research 
organizations, these institutions are also exempt from the requirement 
that employers pay the $110 filing fee. Thus, they stated that INS has 
determined that H-1B workers may pay the cost of the filing fee, as in 
the past. These commenters therefore urged that DOL accept this 
approach so there is no conflict between Federal agencies. The 
University of California also stated that an employer does not have an 
interest in a worker being in the United States prior to commencement 
of employment and therefore should not bear the cost of a change of 
status. Finally, three attorney commenters (Latour, Quan, and Stump) 
argued that forbidding legal fee payment by nonimmigrant workers will 
be especially onerous to small businesses, small private schools, and 
other financially-limited groups which are not familiar with the 
requirements of the H-1B program.
    At the outset, the Department wants to clarify an apparent 
misconception by some commenters regarding the restrictions placed upon 
employers in assessing the employer's own business expenses to H-1B 
workers. An H-1B employer is prohibited from imposing its business 
expenses on the H-1B worker--including attorney fees and other expenses 
associated with the filing of an LCA and H-1B petition--only to the 
extent that the assessment would reduce the H-1B worker's pay below the 
required wage, i.e., the higher of the prevailing wage and the actual 
wage.
    ``Actual wage'' is explained at Sec. 655.731(a)(1) of the existing 
regulations as ``the wage rate paid by the employer to all other 
individuals with the similar experience and qualifications for the 
specific employment in question.'' The regulation continues by noting 
that ``[w]here no such other employees exist at the place of 
employment, the actual wage shall be the wage paid to the H-1B 
nonimmigrant by the employer.''
    The Department also wishes to emphasize, as provided in 
Sec. 655.731(c)(9) of the existing regulations (renumbered in the 
Interim Final Rule as Sec. 655.731(c)(12)), that where a worker is 
required to pay an expense, it is in effect a deduction in wages which 
is prohibited if it has the effect of reducing an employee's pay (after 
subtracting the amount of the expense) below the required wage (i.e., 
the higher of the actual wage or the prevailing wage). An employer 
cannot avoid its wage requirements by paying an employee a check at the 
required wage and then accepting a prohibited payment from a worker 
either directly, or indirectly through the worker's payment of an 
expense which is the employer's responsibility.
    The Interim Final Rule continues to provide that any expenses 
directly related to the filing of the LCA and the H-1B petition are a 
business expense that may not be paid by the H-1B worker if such 
payment would reduce his or her wage below the required wage. These 
expenses are the responsibility of the employer regardless of whether 
the INS filing is to bring an H-1B nonimmigrant into the United States, 
or to amend, change, or extend an H-1B nonimmigrant's status. As stated 
in the NPRM, the LCA application and H-1B petition, by law, may only be 
filed by the H-1B employer. The employer is not required to seek legal 
representation in completing and filing an LCA or H-1B petition, but 
once it utilizes the services of an attorney for this purpose, it has 
incurred an expense associated with the preparation of documents for 
which it has legal responsibility.
    H-1B nonimmigrants are permitted to pay the expenses of functions 
which by law are required to be performed by the nonimmigrant, such as 
translation fees and other costs related to the visa application and 
processing. The Department also recognizes that there may be situations 
where an H-1B worker receives legal advice that is personal to the 
worker. Thus, we did not intend to imply that an H-1B worker may never 
hire an attorney in connection with his or her employment in the United 
States. While the illustrative expenses (translation fees and other 
costs relating to the visa application) were not denominated in the 
NPRM as legal expenses, if they were provided through an attorney these 
costs and associated attorney fees would be personal to the worker and 
may be paid by the worker, rather than expenses that would have to 
borne by the employer. Similarly, any costs associated with the H-1B 
worker's receipt of legal services he or she contracts to receive 
relative to obtaining visas for the worker's family, and the various 
legal obligations of the worker under the laws of the U.S. and the 
country of origin that might arise in connection with residence and 
employment in the U.S., are not ordinarily the employer's business 
expenses. As such, they appropriately may be borne by the worker.
    An employer, however, may not seek to pass its legal costs 
associated with the

[[Page 80200]]

LCA and H-1B petition on to the employee. With respect to the concerns 
regarding small employers who may not have familiarity with H-1B 
requirements and may not know an attorney specializing in this area of 
law, there is nothing to prohibit an H-1B worker from recommending to 
the employer an attorney familiar with the requirements of the H-1B 
program. In addition, if an applicant for a job hired an attorney 
clearly to serve the employee's interest, to negotiate the terms of the 
worker's employment contract, to provide information necessary for the 
H-1B petition or review its terms on the worker's behalf, or to provide 
the applicant with advice in connection with application of U.S. 
employment laws, including the various employee protection provisions 
of the H-1B program and its new whistleblower provisions, the fees for 
such attorney services are not the employer's business expense. In its 
enforcement, the Department will look behind any situation where it 
appears that an employee is absorbing an employer's business expenses 
in the guise of the employee paying his or her own legitimate fees and 
expenses.
    Contrary to the view of many commenters, the Department does not 
read the ACWIA's proscription against an employer's assessment of the 
additional petition filing fee on the H-1B worker as evincing an 
intention that an employer may assess any other expenses against the 
worker. Neither the language of this provision, nor its place within 
the statute's larger context, allows a conclusion that Congress 
intended this provision to affect the ability of an employer to assess 
other costs to H-1B workers. The ACWIA prohibition against charging the 
H-1B worker for the filing fee is much more sweeping than the 
regulatory provision at issue. The ACWIA prohibits an employer from 
charging the fee, even where there would not be a resulting wage 
violation, and even as a part of the liquidated damages an employer may 
contract with a worker to pay for early termination.
    The Department concurs with the comments that the ACWIA does not 
preclude the recovery of expenses in connection with the filing of the 
LCA and H-1B petition as liquidated damages. It is the Department's 
view that there is no basis for distinguishing attorney fees and other 
expenses in connection with these filings from other expenses which may 
be permitted, under state law, as liquidated damages. However, as set 
forth in IV.K, above, the Interim Final Rule provides that the $500/
$1,000 filing fee may not be collected through liquidated damages.
    As stated above, education and research groups stated that INS has 
taken the position that qualified education and research organizations 
who are exempt from paying the additional filing fee will not be 
required to pay the separate $110 petition filing fee themselves, but 
rather INS will accept payment made by the H-1B workers. The Department 
does not believe that this statement is inconsistent with its position, 
since, as discussed above, employers are not prohibited from requiring 
workers to make these payments where the workers are paid above the 
required wage. To the extent these commenters may be suggesting that 
the Department should create an exception for academic and research 
institutions, the Department sees no basis for this suggestion. The 
status of these institutions as exempt from the additional filing fee 
does not change the fact that they are employers who, as such, are 
required to file the LCA and the H-1B petition, and to pay the 
attendant costs if payment by the H-1B worker would bring the worker's 
wages below the required wage.
    In the Interim Final Rule, the discussion of expenses of the H-1B 
program which the employer may not impose on H-1B workers has been 
removed from Appendix B and incorporated in the regulations at 
Sec. 655.731(c)(9)(ii) and (iii).
4. When Is the Service Contract Act Wage Rate Required To Be Applied as 
the ``Prevailing Wage''? (Sec. 655.731(a)(2)(i)(B), Previously Set 
Forth in Proposed Appendix B, Section d)
    Under Sec. 655.731(a)(2)(i) and (iii)(A) of the regulations, if 
there is an applicable wage determination issued under the McNamara-
O'Hara Service Contract Act (SCA) for the occupational classification 
in the area of employment, that SCA wage determination is considered by 
the Department to constitute the prevailing wage for that occupation in 
that area. This use of the SCA wage determination applies regardless of 
whether the employer is an SCA contractor, and regardless of whether 
the workers will be employed on an SCA contract. In the NPRM, the 
Department addressed questions that have arisen concerning application 
of the SCA wage rate for computer occupations where the wage rate on 
the wage determination is $27.63, and application of the SCA wage rate 
where the employer is of the view that the workers are exempt from the 
SCA.
    The NPRM provided at Appendix B, section d, that where an SCA wage 
determination for an occupational classification in the computer 
industry states a rate of $27.63, that rate will not be issued by the 
SESA and may not be used by the employer as the prevailing wage. That 
rate does not constitute a statement of the prevailing wage; it is the 
highest wage that any worker in a skilled computer occupation is 
required to be paid under the SCA. Under that statute, workers are 
exempt from the Act's requirements if they earn more than $27.63 per 
hour, regardless of whether they are paid on a salary basis an hourly 
rate. (See 29 CFR 4.156; 541.3). In such a case, the SESA will use the 
OES survey--rather than the SCA rate--and the employer, if it chooses 
not to obtain a prevailing wage rate from the SESA, will need to 
consult the OES survey or another source for wage information.
    Proposed Appendix B also provided that the question of whether the 
nonimmigrant worker(s) who will be employed will be exempt or non-
exempt from the SCA is irrelevant to use of the SCA wage determination 
to access the prevailing wage. Therefore, in issuing the SCA wage rate 
as the prevailing wage determination, the SESA will not consider 
questions of employee exemption, and, in an enforcement action, the 
Department will consider the SCA wage rate to be the prevailing wage 
without regard to whether any particular H-1B employee(s) would be 
exempt from the SCA if employed under an SCA contract.
    The Department received six comments on this issue. ACIP expressed 
confusion over the Department's singling out the SCA wage rate for 
computer operations, and urged reconsideration of this position before 
issuing interim final regulations. AILA stated that the Department's 
proposal is inconsistent because of this singling out of the SCA rate 
for computer operations, and contended, along with two other commenters 
(Rubin & Dornbaum, Cowan & Miller), that by designating the SCA wage as 
the prevailing wage, the Department virtually requires employers to use 
SESA determinations instead of the other wage sources permitted by law. 
Finally, AILA questioned the proposal to disregard the exempt status of 
the H-1B workers, contending that this is inconsistent with the 
practice used in the Permanent Program, as recognized in the Technical 
Assistance Guide at page 114. Network Appliance and FHCRC objected to 
application of the SCA wage rate where the employer is not subject to 
that Act.

[[Page 80201]]

    The significant role in the regulations of SCA determinations of 
the prevailing wage is founded in the legislative history of the H-1B 
program in IMMACT 90, which evidences Congressional intent that 
prevailing wage determinations be made as in the Permanent Alien Labor 
Certification (immigrant worker) Program, 20 CFR 656.40. See Conf. Rep. 
No. 101-955, 101st Cong., 2d Sess. 122 (1990), 1990 U.S.C.C.A.N. 6787. 
In any event, the general provisions governing use of wage rates in SCA 
wage determinations set forth in the regulations at 
Sec. 655.731(a)(2)(i) and (iii)(A) were not published for comment. 
Proposed Appendix B, section d, addressed only two specific questions: 
application of the SCA wage rate to skilled workers in computer 
occupations, and the broader question of the relevance of whether 
workers would be exempt from the SCA.
    The Department continues to be of the view that SCA wage 
determinations cannot properly be used for computer occupations where 
the wage is stated as $27.63 per hour. As explained above, this wage 
rate is not in any sense a statement of the prevailing wage for the 
occupation. Rather, this rate is instead a ``cap'' on the SCA-required 
wage that results from an SCA statutory provision which has no 
application in the H-1B program. Allowing the use of the $27.63 rate as 
the prevailing wage would therefore undermine the statutory requirement 
that workers be paid at least the prevailing wage, and create an 
economic incentive to utilize H-1B workers rather than U.S. workers. 
Furthermore, computer occupations are treated differently than other 
occupations with regard to the use of SCA rates because these 
occupations are treated uniquely under the SCA. Only for skilled 
computer occupations is there a cap on the wage set under the SCA, by 
virtue of a Congressional enactment exempting workers who are paid more 
than $27.63 per hour from the Fair Labor Standards Act, and therefore 
from the SCA. See 41 U.S.C. 357(b); Pub. L. 101-583, Sec. 2, Nov. 15, 
1990, 104 Stat. 2871, as amended by Pub. L. 104-188, 110 Stat. 1929.
    For several reasons, the Department also continues to be of the 
view that the potential SCA-exempt status of the nonimmigrant workers 
who will be employed under the LCA is irrelevant. SCA wage 
determinations (with the exception of computer professionals, as 
discussed above) are the Department's statement of the prevailing wage 
of the occupations listed, and are made without regard to the exempt 
status of workers surveyed. Furthermore, exemption status cannot be 
determined in advance, based on an employee's occupation. Rather, 
determinations are made only on examination of the actual duties 
performed by individual employees and on an examination of the manner 
in which the employees are paid. With the exception of computer 
professionals, doctors and attorneys, SCA-exempt employees must be paid 
either on a salary or fee basis. See 29 CFR part 541. The Department 
notes that this interpretation is not in fact inconsistent with the 
provisions of the Permanent Program's Technical Assistance Guide, which 
requires use of the SCA wage determination ``[i]f the job opportunity 
is in an occupation and a geographic area for which DOL has made a wage 
determination'' under the SCA. Page 114 of the Guide simply points out 
that executive, administrative, and professional employees are exempt 
from the SCA, but does not state that the exemption is intended to 
limit the application of the SCA wage determination in determining the 
prevailing wage under the permanent program. In any event, it is the 
Department's intention to conform its prevailing wage determinations 
under the Permanent Program to the interpretations in this Rule, as set 
forth in Sec. 655.731(a)(2)(i)(B) (rather than in Appendix B, as 
proposed).
5. How Are the ``PMSA'' and ``CMSA'' Concepts Applied? (Sec. 655.715, 
Previously in Proposed Appendix B, Section e)
    The regulations at Sec. 655.731(a)(2) require that the prevailing 
wage be determined for the occupational classification in the area of 
intended employment. ``Area of intended employment'' in turn is defined 
to include ``the area within normal commuting distance'' of the place 
where the H-1B worker will be employed. This definition further 
provides that ``[i]f the place of employment is within a Metropolitan 
Statistical Area (MSA), any place within the MSA is deemed to be within 
normal commuting distance of the place of employment.''
    Proposed Appendix B, section e, further explained that in computing 
prevailing wages for an ``area of intended employment,'' the Department 
will consider all locations within either an MSA or a primary 
metropolitan statistical area (PMSA) to constitute ``normal commuting 
distance.'' The NPRM further stated that ``a consolidated metropolitan 
statistical area (CMSA) will not be used in this manner in determining 
the prevailing wage rates.'' The Department sought to explain, 
parenthetically, that this simply meant that all locations within a 
CMSA will not necessarily be deemed to be within normal commuting 
distance. The Department determined, based on its operational 
experience, that CMSAs can be too geographically broad to be used in 
this manner. Because the Department has not adopted any rigid measure 
of distance as a ``normal commuting area,'' locations near the 
boundaries of MSAs and PMSAs, and locations within or near the 
boundaries of CMSAs may be within normal commuting distance, depending 
on the factual circumstances.
    The Department received four comments (ACIP, AILA, Intel, Latour) 
on this issue. ACIP believes that there is no justification for 
eliminating the use of CMSAs for prevailing wage purposes, and that 
requiring the use of PMSAs and MSAs will unnecessarily inflate the 
prevailing wage rate for employers located in certain metropolitan 
areas. That organization further commented that the fact that many wage 
surveys use CMSAs supports their contention that workers do in fact 
commute within these regions and CMSAs should continue to be a valid 
statistical area.
    AILA expressed its agreement that employers should make good faith 
efforts to utilize surveys which fit a geographical area, but noted 
that it is not always possible. Thus, it recommended that employers be 
able to use broader geographic surveys where no valid local surveys can 
be found. Intel expressed a similar view. Latour stated that it has 
used ``normal commuting distance'' since IMMACT 90, and the 
Department's proposal would only create confusion for employers.
    These comments demonstrate a misunderstanding on the part of the 
commenters of the Department's view on the use of CMSAs. The Department 
did not intend to place a blanket prohibition on the use of CMSAs. 
Rather, the Department intended only to clarify, albeit 
parenthetically, that, unlike MSAs and PMSAs, locations within a CMSA 
are not automatically deemed to be within normal commuting distance. If 
an employer can show that it could not get an adequate sample at the 
MSA or PMSA level, a survey based upon a CMSA may, in fact, be 
appropriate. In such a situation, the employer should demonstrate that 
it was not possible to obtain a representative sample of similarly 
employed workers within the MSA or PMSA. Upon such a showing, the CMSA 
survey should be acceptable. Furthermore, if an employer is unable to 
obtain a representative sample at the MSA or PMSA level, GAL 2-98 
(ETA's prevailing wage policy directive)

[[Page 80202]]

specifically directs that the geographic base of the survey should be 
expanded. The Department's proposals on this issue also sought to 
introduce the PMSA concept into the regulation, which had previously 
discussed only MSAs. The Department has therefore amended the 
definition of ``Area of intended employment'' in Sec. 655.715, 
consistent with this discussion, and has removed the discussion from 
proposed Appendix B, section e.
6. How Does the ``Weighted Average'' Apply in the Determination of the 
Prevailing Wage, and What Other Issues Have Arisen Concerning the 
Determination of the Prevailing Wage? (Sec. 655.731(b)(3)(iii)(B)(1), 
Previously in Proposed Appendix B, Section f; Sec. 655.731(a)(2)(vii); 
and Proposed Revisions to Sec. 655.731(a)(2)(iii) and (d)(4))
    Proposed Appendix B, section f, explained that, due to the 
inadvertent omission of the word ``weighted'' from one provision of the 
regulation, there had been a suggestion of confusion regarding whether 
an employer which uses an ``independent authoritative source'' to 
determine prevailing wages was required to use a ``weighted average'' 
methodology. Therefore proposed Appendix B described this methodology 
and how and when it is to be used.
    The Department received no comments on this provision. The 
Department has amended Sec. 655.731(b)(3)(iii)(B)(1) to expressly 
require a weighted average and has removed this section from Appendix 
B.
    As discussed above in IV.O.4, the Department has concluded that an 
employer will not be required to keep hourly wage records for full-time 
H-1B workers paid on a salary basis where the prevailing wage is 
expressed as an hourly wage. In order to permit this change in the 
recordkeeping provisions, it is necessary that the regulations be 
amended to explain that the hourly wage may be converted to a salary. 
Section 655.731(a)(2)(vii) is therefore amended to provide that an 
hourly rate may be converted to a weekly salary by multiplying the rate 
by 40, and may be converted to an annual salary by multiplying by 2080, 
etc.
7. What is the Effect of a New LCA on the Employer's Prevailing Wage 
Obligation Under a Pre-Existing LCA? (Sec. 655.731(a)(4), Previously in 
Proposed Appendix B, Section g)
    The Department, in the 1999 NPRM, acknowledged the possibility of 
confusion among employers regarding the prevailing wage obligation of 
an employer which has filed more than one LCA for the same occupational 
classification in the same area of employment. In such circumstances, 
the Department observed, the employer could have H-1B employees in the 
same occupational classification in the same area of employment brought 
into the United States (or accorded H-1B status) based on petitions 
approved pursuant to different LCAs (filed at different times) with 
different prevailing wage determinations. Therefore, the Department 
advised in proposed Appendix B to Subpart H, that the prevailing wage 
rate as to any particular H-1B nonimmigrant is prescribed by the LCA 
which supports that nonimmigrant's H-1B petition. The regulations 
require that the employer obtain the prevailing wage at the time that 
the LCA is filed (Sec. 655.731(a)(2)). The LCA is valid for the period 
certified by ETA, and the employer must satisfy all the LCA's 
requirements for as long as any H-1B nonimmigrants are employed 
pursuant to that LCA (Sec. 655.750). Where new nonimmigrants are 
employed pursuant to a new LCA, that new LCA prescribes the employer's 
obligations as to those new nonimmigrants. The prevailing wage 
determination on the later/subsequent LCA does not ``relate back'' to 
operate as an ``update'' of the prevailing wage for the previously-
filed LCA for the same occupational classification in the same area of 
employment. The Department also cautioned employers that every H-1B 
worker is to be paid in accordance with the employer's actual wage 
system (regardless of any difference among prevailing wage rates under 
various LCAs), and thus is to receive any pay increases which that 
system provides (e.g., merit increases; cost of living increases).
    One commenter, AILA, welcomed the acknowledgment that a prevailing 
wage on an LCA is not changed by later prevailing wage determinations. 
However, AILA expressed opposition to the reminder that an employer is 
obligated to pay any wage increases provided by its actual wage system.
    The Department has removed its discussion of this issue from 
Appendix B to the regulations at Sec. 655.731(a)(4). The issue of 
payment of wage increases under the actual wage system is discussed 
above in IV.O.3 of the preamble.

Q. Miscellaneous Matters

    The Department has also made minor changes to the regulations not 
discussed above.
    Section 655.700(c)(2) has been amended to explain the effect of the 
ACWIA amendments upon the entry and employment of a nonimmigrant who is 
a citizen of Mexico pursuant to the provisions of the North American 
Free Trade Agreement (NAFTA). As a general matter, the H-1B 
requirements continue to apply. To avoid the imposition of more 
stringent requirements on the entry of such nonimmigrants (who are 
classified as ``TN''), however, neither the recruitment nor the 
displacement provisions apply to these nonimmigrants. The Interim Final 
Rule also continues the practice of applying the statutory and 
regulatory provisions for registered nurses (most recently the Nursing 
Relief for Disadvantaged Areas Act of 1999, Pub. L. 106-95) to TNs.
    In addition, several places (e.g., Secs. 655.700, 655.705, 
655.715), have been revised to reflect the amendments made by the ACWIA 
and the October 2000 Amendments, and to reflect the current 
Departmental organizational structure.

V. Executive Order 12866

    Because of its importance to the public and to the Administration's 
priorities, the Department is treating this rule as a ``significant 
regulatory action'' within the meaning of section 3(f)(4) of Executive 
Order (E.O.) 12866. E.O. 12866 requires a full economic impact analysis 
only for ``economically significant'' rules as defined in section 
3(f)(1). An ``economically significant'' rule pursuant to section 
3(f)(1) is one that may ``have an annual effect on the economy of $100 
million or more, or adversely affect in a material way the economy, 
productivity, competition, jobs, the environment, public health or 
safety, or State, local, or tribal governments or communities.''
    As noted in the NPRM, the H-1B visa program is a voluntary program 
that allows employers to temporarily secure and employ nonimmigrants 
admitted under H-1B visas to fill specialized jobs not filled by U.S. 
workers. In order to protect U.S. workers' wages and eliminate any 
economic incentive or advantage in hiring temporary foreign workers, 
Section 212(n) of the INA imposes various requirements on employers, 
including the requirement that the employer pay an H-1B worker the 
higher of the actual wage or the prevailing wage. This Interim Final 
Rule implements statutory changes in the H-1B visa program enacted by 
the ACWIA. The ACWIA (1) temporarily increases the maximum number of H-
1B visas permitted each year; (2) temporarily requires, during the 
increased H-1B cap period, new non-displacement (layoff) and 
recruitment attestations by ``H-1B-

[[Page 80203]]

dependent'' employers and employers found to have committed willful 
violations or misrepresentations; (3) requires employers of H-1B 
workers to offer the same fringe benefits to H-1B workers as they offer 
U.S. workers; (4) requires employers in certain cases to pay H-1B 
workers in a non-productive status; and (5) provides whistleblower 
protections to employees (including former employees and applicants) 
who disclose information about potential violations or cooperate in an 
investigation or proceeding. In addition, this Rule contains final 
rules on certain proposals previously published for comment in October 
1995, and on proposals relating to the Department's interpretations of 
the INA and its existing regulations.
    The Department, in the NPRM, concluded that this rule is not 
``economically significant'' because the direct, incremental costs that 
an employer would incur because of this rule, above customary business 
expenses associated with recruiting qualified job applicants and 
retaining qualified employees in specialized jobs, are expected to be 
minimal. Collectively, the changes proposed by this rule will not have 
an annual effect on the economy of $100 million or more or adversely 
affect in a material way the economy, a sector of the economy, 
productivity, jobs, the environment, public health or safety, or State, 
local, or tribal governments or communities. Therefore, the Department 
concluded that this rule is not a ``significant regulatory action'' as 
defined by section 3(f)(1) of E.O. 12866, and no economic impact 
analysis is required under section 6(a)(3).
    Four commenters (ACIP, AILA, Hammond and TCS) specifically 
responded to the Department's findings with respect to E.O. 12866. 
Hammond disagreed with the Department's assessment that a full economic 
impact analysis is not required. That commenter stated its belief that 
the direct, incremental costs an employer would incur because of this 
rule are above the customary and usual business expenses for recruiting 
qualified job applicants and for retaining qualified employees in 
specialized jobs. Hammond contended that the rule will impose 
significant costs that will have an annual effect on the economy of 
$100 million or more, and will adversely affect the computer industry 
and its productivity.
    All four commenters stated their view that the Department has 
underestimated the additional burdens and costs to be attributed to the 
new regulatory provisions on all H-1B employers, and that the economic 
impact of the rule is not limited to H-1B-dependent employers. AILA 
urged the Department to provide a more accurate and reasonable estimate 
of the burden created by its regulatory provisions, using reliable data 
and computations, before imposing the regulations in final form. In the 
alternative, and in the absence of data to support a reasonable 
estimate of the economic impact on H-1B employers, AILA recommended the 
adoption of regulations that are less burdensome.
    For the reasons discussed above and in the preamble of the NPRM, 
the Department continues to believe that the Interim Final Rule is not 
an ``economically significant'' regulatory action under E.O. 12866, 
section 3(f)(1). Furthermore, as described in detail above, the 
Department has made significant changes in several provisions which 
will lessen the perceived burden to employers. Accordingly, the Rule 
does not require an assessment of costs and benefits under section 
6(a)(3) of that E.O. The Rule, however, was treated as a ``significant 
regulatory action'' under E.O. 12866, section 3(f)(4), because of its 
importance to the public and to the Administration's priorities and 
was, therefore, reviewed by the Office of Management and Budget.

VI. Final Regulatory Flexibility Analysis

    The Regulatory Flexibility Act (5 U.S.C. 601-612) requires agencies 
to prepare and make available for public comment an initial regulatory 
flexibility analysis, describing the anticipated impact of the proposed 
rule on small entities. This initial analysis was published as part of 
the NPRM. The initial regulatory flexibility analysis concluded that 
the proposed rule would not have a significant economic impact on a 
substantial number of small entities within the meaning of the 
Regulatory Flexibility Act. The Regulatory Flexibility Act also 
requires agencies to prepare a final regulatory analysis, assessing 
comments received on the initial analysis, describing any significant 
alternatives affecting small entities that were considered in arriving 
at the final rule, and the anticipated impact of the rule on small 
entities.
    In the initial regulatory flexibility analysis, the Department 
noted that available data and analyses indicated that most of the 
businesses in the industries in which H-1B workers likely would be 
employed would meet SBA's definition of ``small.'' The Department, 
however, stated its conclusion that the economic impact of the rule 
would not be significant. As there explained, most of the new 
compliance obligations addressed in this rulemaking apply to only a 
small subset of the full universe of employers that participate in the 
H-1B program, namely, those that meet the new definition of ``H-1B 
dependent employer'' and those found to have committed willful 
violations or misrepresentations (``willful violators''), which the 
Department estimated to be no more than 200 employers.
    Upon further analysis, including review of the comments received by 
the Department, we have concluded that the Department's initial 
assessment was correct, i.e., the rules will not have a significant 
economic impact on a substantial number of small entities within the 
meaning of the Regulatory Flexibility Act.
    The discussion which follows addresses the statutory requirements 
bearing on this final analysis. While much of the discussion closely 
tracks the language in the Department's initial analysis, we address 
below the comments received bearing upon the impact of the rule on 
small entities. The reader should review the supplementary information 
section of the preamble (particularly section IV) for a full discussion 
of the various alternatives considered by the Department in crafting 
the IFR. However, we discuss below some aspects of these alternatives 
as they relate to small entities.

1. What Are the Objectives of, and the Legal Basis for, the Interim 
Final Rule?

    On October 21, 1998, President Clinton signed into law the American 
Competitiveness and Workforce Improvement Act of 1998 (ACWIA), which 
was enacted as Title IV of the Omnibus Consolidated and Emergency 
Supplemental Appropriations Act for Fiscal Year 1999 (Public Law 105-
277). The ACWIA amended the Immigration and Nationality Act (INA), as 
amended (8 U.S.C. 1101 et seq.), relating to the H-1B visa program. 
Under the H-1B visa program, employers may temporarily employ 
nonimmigrants admitted into the U.S. under H-1B visas in specialty 
occupations and as fashion models, instead of employing U.S. workers, 
under certain conditions. Section 412(d) of the ACWIA provides that 
some of the amendments made by the ACWIA do not take effect until the 
Department promulgates implementing regulations, which are the subject 
of this rulemaking.
    The Interim Final Rule is issued pursuant to provisions of the INA, 
as amended, and the ACWIA, 8 U.S.C. 1101(a)(15)(H)(i)(b), 1182(n), and 
1184; 29 U.S.C. 49 et seq.; sec. 303(a)(8), Pub. L. 102-232, 105 Stat. 
1733, 1748 (8

[[Page 80204]]

U.S.C. 1182 note); and sec. 412(d) and (e), Pub. L. 105-277, 112 Stat. 
2681. The objectives of the rule are to enable employers to understand 
and comply with applicable requirements under the amended H-1B visa 
program, and to advise employees and applicants of the protections 
afforded by the amendments to U.S. and H-1B workers.

2. What Comments Were Received Addressing the Initial Regulatory 
Flexibility Analysis, How Does the Department Assess the Comments, and 
What Changes, if Any, Were Made as a Result of the Comments?

    As discussed below, the Department received only a few comments 
(from ACIP, AILA, Hammond and ITAA) that specifically discussed the 
initial regulatory flexibility analysis. The comments specifically 
directed at the initial regulatory flexibility analysis addressed only 
the commenters' disagreement with the Department's estimate of the 
number of U.S. employers that would be affected by the rule's 
requirements pertaining to H-1B-dependent employers or willful 
violators. Employers with such status (generally those employers with 
more than 15 percent of their workforce comprised of nonimmigrants or 
employers found to have willfully violated H-1B requirements) must 
follow requirements not imposed on the much larger number of employers 
that employ a smaller percentage of nonimmigrant workers. Since the 
comments received specifically relate to the Department's estimate 
regarding the number of small entities affected by the IFR, the 
comments are discussed in the next section of this analysis.
    Although not raised in connection with the initial analysis, 
numerous commenters, as detailed in the preceding sections of the 
preamble to the Interim Final Rule, objected to the recordkeeping 
burdens imposed by the rule; a few commenters (Chamber of Commerce, 
IEEE, Simmons) expressed a general concern that the regulations would 
impose requirements that small businesses would find burdensome. (See 
sections IV.D.7, D.8, E.1.)
    The Department has taken these comments into account, clarifying 
the particular requirements in several respects. While many of these 
comments did not differentiate among employers by size, the Department 
has made many adjustments in the Interim Final Rule, as discussed 
above, that will benefit small employers. The comments reflected some 
misunderstanding regarding the need to create, as distinguished from 
retaining or maintaining, documents relating to the H-1B employment 
process. The Rule requires the creation of documents in only a 
relatively few instances. And, in most instances, the maintenance of 
these documents already is required by other statutes and regulations. 
For example, while the regulation requires employers in some instances 
to maintain basic payroll and hours worked records for certain 
employees, employers are already required to do so by other federal 
statutes, such as the Fair Labor Standards Act. In a related matter, 
the Interim Final Rule clarifies that employers need not segregate H-1B 
documents in a file or system separate from other employment documents. 
Finally, the Rule, at Sec. 655.760, clarifies the documents that need 
to be kept in a public access file and simplifies the employer's 
obligations in this regard. These aspects of the Rule are discussed in 
full in the earlier sections of the preamble. The reader's particular 
attention to the following points is recommended: The Paperwork 
Reduction Act summary in section I; non-displacement documentation 
(IV.D.8); recruitment practices (IV.E.2); recruitment documentation 
(IV.E.5); benefits documentation (IV.G.2); location of documents 
(IV.D.3); hours worked documentation (IV.O.4); public access rules 
clarified (IV.O.4 and Sec. 655.760 of the Rule).
    The Rule also contains several provisions that will particularly 
benefit small businesses. The Department has provided: A toll free fax 
number to file LCAs (see IV.B); free or nominal charge resources for 
determining ``master's degree equivalence'' (see IV.C.2) and 
determining ``specialities related to'' a master's degree (see IV.C.3). 
Other aspects of the Rule that may be of particular assistance to some 
small entities include the use of a download program that can be used 
with Apple Macintosh systems (see IV.B.5) and employer options 
regarding the payment of benefits to H-1B workers already employed 
abroad by the employer or its affiliate (see IV.G.1). The Department's 
outreach efforts to explain the requirements of the ACWIA and the Rule 
also benefit small entities. As part of these efforts, the Department, 
as discussed in the preamble above, at section IV.B, plans to make 
available soon its small business compliance guide and to set up a 
computer program that will enable individuals and employers to obtain 
answers to their H-1B questions.
    The Department received some miscellaneous comments that concern 
small entities. As noted above, at section IV.N of the preamble, the 
Department received a comment requesting that state school districts 
and private schools be included in the special prevailing wage 
provisions. The Department has concluded that the statute does not 
allow for such exemption.
    One commenter (Gurtu & McGoldrick) expressed the summary view that 
the rules would impose excessive recordkeeping requirements on small 
businesses. As noted here and throughout the preamble, we believe that 
the Interim Final Rule imposes only minimal obligations on employers, 
and that the ACWIA does not allow the latitude to except small entities 
from the requirements necessary to ensure compliance with the statute. 
(See section 8 below.)
    Another commenter (SBSC) expressed the view that the Department's 
use of established definitions and regulations from areas of the law 
external to immigration would prove costly to small employers. We 
believe that we have provided ample information to allow all employers 
to understand and comply with all aspects of the H-1B program. No 
employer is required to look beyond the regulations in order to meet 
these obligations. At the same time, the references in the preamble to 
other statutes should assist employers by providing them with 
potentially useful guides to help them in meeting these requirements 
and by reminding them that other laws may bear on the employment of H-
1B workers.

3. How Many Small Entities Will Be Covered by the Interim Final Rule?

    A. As the Department noted in the initial regulatory flexibility 
analysis, the rule will have the greatest impact on ``H-1B-dependent'' 
employers and ``willful violators.'' Other aspects of the rule will 
apply all to employers which seek to temporarily employ nonimmigrants 
admitted into the U.S. under the H-1B visa program in specialty 
occupations and as fashion models. The initial analysis distinguished 
between ``H-1B dependent employers''/''willful violators'' and all 
other H-1B employers and we follow that approach here in discussing 
these two groups of employers.
    Section 412 (a)(3) of the ACWIA defines ``H-1B-dependent employer'' 
as an employer that has 25 or fewer full-time equivalent employees 
employed in the U.S. and more than 7 H-1B nonimmigrants, at least 26 
but not more than 50 full-time equivalent employees and more than 12 H-
1B nonimmigrants, or at least 51 full-time equivalent employees and a 
workforce of H-1B nonimmigrants comprising at least 15

[[Page 80205]]

percent of its full-time equivalent employees. The ACWIA requires H-1B-
dependent employers and employers found to have willfully violated H-1B 
requirements to attest that they will not displace (layoff) U.S. 
workers and replace them with H-1B workers in essentially equivalent 
jobs, that they will not place H-1B workers with other employers 
without first inquiring as to whether they intend to displace U.S. 
workers, and that they have taken good faith steps to recruit in the 
United States for U.S. workers to fill the jobs for which they are 
seeking H-1B workers. An employer filing an LCA pertaining only to 
``exempt H-1B nonimmigrants'' need not comply with the non-displacement 
and good faith recruitment attestations, regardless of status as an H-
1B-dependent or willful violator. ``Exempt H-1B nonimmigrants'' are 
defined as those who earn at least $60,000 annually or who have 
attained a master's degree or its equivalent in a specialty related to 
the intended employment.
    B. The definition of ``small'' business varies considerably, 
depending on the policy issues and circumstances under review, the 
industry being studied, and the measures used. The size standards used 
by the U.S. Small Business Administration (SBA) to define small 
business concerns according to their Standard Industrial Classification 
(SIC) codes are codified at 13 CFR 121.201. SBA's small size standards 
are generally expressed either in maximum number of employees or annual 
receipts (in millions of dollars).
    As explained in the initial analysis, we could apply SBA's size 
standards and gauge precisely how many of the affected businesses are 
``small'' if we were able to construct a profile of each business that 
used H-1B workers, showing both the total number of workers employed 
and the portion that are H-1B workers, together with total annual 
receipts and the applicable SIC industry code. Unfortunately, the 
precise data required for this analysis are not available. However, we 
know that by far the greatest number of occupations in LCAs certified 
under the H-1B program have historically been for computer-related 
occupations, and for therapists (principally physical and 
occupational).\1\ Looking just at these categories would present a view 
of 60 to 70 percent of all the certified job openings under the H-1B 
program.
---------------------------------------------------------------------------

    \1\ Our initial analysis, utilizing 1997 data, showed that 
398,324 job openings were certified--44.4 percent in computer-
related occupations and 25.9 percent for therapists. More recent 
data for FY 1999 shows 53.2 percent of 1,089,524 openings certified 
were in computer-related occupations and 17.7 percent were 
therapists (of whom 118,350 or 88.27 percent were filed by one 
employer). For the period October 1, 1999 through May 31, 2000, 
514,263 openings were certified--61 percent in computer-related 
occupations and only 0.5 percent therapists.
---------------------------------------------------------------------------

    For Major Group 73, Business Services, the SBA's small business 
size standards for SIC codes in which computer-related occupations 
would likely be employed are all at the $18 million level (annual 
receipts).\2\ Data from the 1992 Census of Service Industries: 
Establishment and Firm Size (published February 1995) indicate that 
39,511 out of a total 40,242 firms (or 98.18 percent) have annual 
receipts less than $18 million.
---------------------------------------------------------------------------

    \2\ Major Group 73 includes the followng SIC industries: 
Computer Programming Services (7371); Prepackaged Software (7372); 
Computer Intergrated Systems Design (7373); Computer Processing and 
Data Preparation and Processing Services (7374); Information 
Retrieval Services (7375); Computer Facilities Management Services 
(7376); Computer Rental and Leasing (7377); Computer Maintenance and 
Repair (7378); and Computer Related Services. Not Elsewhere 
Classified (N.E.C.) (7379).
---------------------------------------------------------------------------

    The Business Services category would not include other users of H-
1B workers in computer-related occupations, such as computer equipment 
manufacturers. For computer and other electronic equipment 
manufacturers, the SBA's small size threshold is 1,000 employees.\3\ In 
1994 (latest data on size distribution), 1.6 percent of the 
establishments employed 1,000 or more workers (comprising 42.1 percent 
of the employment in the industry).\4\ There were more than 14,000 
establishments in this industry in 1996.
---------------------------------------------------------------------------

    \3\ According to BLS, the following five SICs comprise the 
electronic equipment manufacturing industry: 357, Computer and 
Office Equipment; 365; Household Audio and Video Equipment; 366, 
Communications Equipment; 367, Electronic Components and 
Accessories; and 381, Search and Navigation Equipment. These five 
SICs share common need for high levels of computer programmers, 
analysts, engineers and other computer scientists. BLS has published 
data on establishment size for the industry as a whole, but not its 
five components. See Career Guide to Industries, BLS Bulletin 2503, 
pp. 53-56, January 1998. The products of this industry include 
computers and computer storage devices such as disk drives; 
semiconductors (silicon or computer chips or integrated circuits), 
which are the core of computers and other advanced electronic 
products; computer peripheral equipment such as printers and 
scanners; calculating and accounting machines such as automated 
teller machines; and other electronic equipment using highly skilled 
computer and other scientists and professionals.
    \4\ BLS Bulletin 2503 (January 1998). Source: U.S. Department of 
Commerce. County Business Patterns, 1994.
---------------------------------------------------------------------------

    For Major Group 80, Health Services, the SBA's small size threshold 
for all categories within the group are at the $5 million (annual 
receipts) level. Data from the 1992 Census of Service Industries: 
Establishment and Firm Size (February 1995) indicate that 244,437 out 
of a total 249,052 firms (or 98.15 percent) have annual receipts less 
than $5 million.\5\
---------------------------------------------------------------------------

    \5\ SIC industries 8021 (Offices and Clinics of Dentists), 8042 
(Offices and Clinics of Optometrists), 8072 (Dental Laboratories), 
and 8092 (Kidney Dialysis Centers) were subtracted from the total 
number of health service firms in SIC 80 for purposes of this 
analysis, based on the assumption that such firms would not likely 
employ physical or occupational therapists.
---------------------------------------------------------------------------

    Based on the above data, we concluded in the initial analysis that 
the vast majority (over 98 percent) of the businesses in the industries 
in which H-1B workers are likely to be employed would meet SBA's 
definition of ``small.'' In the initial analysis, the Department 
estimated that approximately 50,000 employers a year file LCA's for H-
1B nonimmigrants. The Department also estimated that not more than ten 
(10) employers a year will be found to have committed willful 
violations. The Department has received no comments, nor possesses any 
other information, that would call into question this approach or the 
estimate it yielded in the initial analysis. Based upon its updated 
review of the number of LCAs filed per year and taking into 
consideration the increase in petitions permitted by the October 2000 
amendments to the INA, the Department currently estimates that 63,500 
employers a year will file LCAs.
    C. As noted in the initial analysis, there are no data available to 
determine how many ``H-1B-dependent'' employers will exist under the 
rule. We arrived at our estimate of the number of ``H-1B-dependent'' 
employers for purposes of the initial analysis, as follows. Although 
the test for H-1B dependency varies with the size of the employer, an 
employer must employ at least seven H-1B workers to be dependent. 
Therefore, we stated that if we assume that every H-1B-dependent 
employer had the smallest workforce threshold (25 full-time equivalent 
employees) and therefore subject to the ``more than seven H-1B'' 
workers test, we can estimate the maximum potential number of H-1B-
dependent employers in computer-related fields and health services 
(using therapists) by determining how many of those employers submitted 
LCAs seeking certification of more than seven H-1B nonimmigrants on a 
single LCA. This approach undercounts the potential number of H-1B-
dependent employers because some employers requesting fewer than seven 
H-1B workers on a single LCA may already employ other H-1B workers or 
may file more than one LCA. For purposes of the initial analysis, 
therefore, we calculated the number of employers for which more

[[Page 80206]]

than five (5) H-1B nonimmigrants were certified on a single LCA to work 
in computer-related fields or as therapists in FY 1997, to estimate an 
upper-bound limit of the maximum potential number of H-1B-dependent 
employers. This yielded a total of 1,425 employers (8.7 percent of the 
total in the sample). This approach for setting the maximum upper limit 
greatly overstates H-1B dependency, however, because many larger firms 
employing more than 25 full-time employees would automatically be 
included in the count of H-1B dependents. For example, we know, that 
many major employers of H-1B workers have workforces larger than 25 
full-time equivalent employees. In addition, some employers file LCAs 
certifying a need for H-1B workers but for various reasons never fill 
all the positions.
    Both ACIP and AILA asserted that the Department's premises and 
conclusion were not logically connected and, along with the other two 
commenters, contended that the Department's estimate is not supported 
by reliable data. AILA stated that the number of affected employers and 
the resultant burden ``may be significantly higher than the DOL 
suggests.'' ACIP and AILA asserted that the Department's estimated 
``upper limit'' of 1,425 H-1B dependent employers was based on an 
unsupported and, in their view, incorrect assumption that employers 
generally file ``blanket LCAs.'' Hammond recommended that the 
Department work with the INS to analyze the economic information 
required in an H-1B petition to determine the probable number of small 
and H-1B dependent employers that will be affected by the proposed 
regulations.
    As the Department explained in both the initial regulatory analysis 
and in other sections of the preamble to the NPRM, aside from 
reasonable estimates, there are no data available to determine 
precisely how many ``H-1B dependent'' employers will exist under the 
rule in any given year, nor how many employers will be found to have 
committed willful violations or misrepresentations. Such precision 
would require a profile of each business that used H-1B workers, 
showing both the total number of workers employed and the portion that 
are H-1B workers, together with total annual receipts and the 
applicable SIC industry code for each business. Additional data 
identifying the education and earnings profiles of the H-1B workers 
would be needed to determine whether H-1B-dependent employers would 
likely be filing LCAs for only exempt workers. In the course of 
developing the NPRM, the Department requested available information 
from the INS and was advised that information required in an H-1B 
petition would not enable us or the INS to determine the probable 
number of small or H-1B-dependent employers that would be affected by 
the proposed regulations. The Department's conclusion that no such data 
existed was borne out by the lack of any suggestions in the comments 
that such data exist. Similarly, we received no suggestions for 
arriving at a better estimate of the number of employers that would be 
affected by the rule.
    After review of the comments and available data, the Department has 
concluded that there are no data to assist it in determining the likely 
number of H-1B-dependent employers and willful violators. The 
Department has received no information that leads it to question its 
estimate in the initial analysis that the number of H-1B-dependent 
employers and willful violators who would be subject to the new 
recruitment and displacement attestations would be between 100 and 200 
employers. The Department does not believe that the increase in the cap 
for H-1B workers will have a proportionate effect on the number of 
dependent employers, since the Department believes that most such 
employers are already dependent. To take into account employers that 
may have been close to H-1B-dependency under the former cap who could 
now employ a larger number of H-1B workers, the Department now 
estimates the number of H-1B-dependent employers and willful violators 
to be 150 to 250 employers, at a midpoint of 200 employers.

4. What Are the Projected Reporting, Recordkeeping and Other Compliance 
Requirements of the Interim Final Rule, Which Small Entities Will They 
Affect, and What Type of Professional Skills Are Needed To Meet the 
Requirements?

    The reporting and recordkeeping requirements of the Rule are not 
overly complex, and in most cases simply require that a copy be kept of 
a record made for other purposes or that a simple arithmetic 
calculation be performed. There are no requirements for technical, 
specialized or professional skills to comply with the reporting or 
recordkeeping provisions of the rule. The particular reporting and 
recordkeeping requirements of this Rule are described above in the 
Supplementary Information section entitled ``Paperwork Reduction Act'' 
and in various places throughout the preamble. Some of these 
requirements are also briefly summarized below.
    As noted, most new recordkeeping and compliance requirements 
imposed by the ACWIA and this rule apply only to employers meeting the 
new definition of ``H-1B-dependent employer'' or employers found to 
have committed willful violations or misrepresentations, which we 
estimate to number between 125 and 225. To determine if it meets the 
new definition of ``H-1B-dependent employer,'' an employer of H-1B 
workers must compare the number of its H-1B workers to the number of 
full-time equivalent employees. H-1B-dependent employers and willful 
violators must comply with the new ``non-displacement'' and ``good 
faith recruitment'' requirements of the ACWIA. In many cases, it will 
be readily apparent, at either end of the spectrum, whether an employer 
is or is not H-1B dependent and no actual computation will be 
necessary. Based on the comments, the Interim Final Rule provides an 
easy test for determining if H-1B-dependency status is readily 
apparent. In the few instances where actual computations will be 
required, the Rule also provides an easier, alternative method of 
determining full-time equivalent employees.
    The ACWIA provisions on non-displacement and recruitment of U.S. 
workers do not apply if the LCA is used for petitioning only ``exempt 
H-1B nonimmigrants.'' If INS determines in the course of adjudicating 
an H-1B petition that an H-1B nonimmigrant is exempt, the employer must 
keep a copy of the determination in the public access file.
    The Interim Final Rule would require an H-1B-dependent employer or 
willful violator that is seeking to place an H-1B nonimmigrant with 
another employer to secure and retain a written assurance from the 
second employer, a contemporaneous written record of the second 
employer's verbal statement, or a prohibition in the contract between 
the two employers, stating that the second employer has not displaced 
and intends not to displace a U.S. worker.
    H-1B-dependent employers and willful violators must maintain 
documentation that they have not displaced U.S. workers for a period 90 
days before and 90 days after the employer petitions for an H-1B 
worker. The Interim Final Rule, like the proposed rule, requires 
covered employers to maintain typical personnel records that would 
ordinarily be readily available, including name, last known mailing 
address, title and description of job, and any documentation kept on 
the employee's experience and

[[Page 80207]]

qualifications and principal assignments, for all U.S. workers who left 
employment during the 180-day window. The employer must also keep all 
documents concerning the departure of any such U.S. employees and the 
terms of any offers of similar employment made to them and their 
responses. In most cases no special records need to be created to meet 
these requirements. EEOC requires under its regulations that any such 
existing records be maintained by employers.
    H-1B-dependent employers and willful violators must make good faith 
efforts to recruit U.S. workers using procedures that meet industry-
wide standards before hiring H-1B workers. These employers will be 
required to keep documentation of the recruiting methods they used, 
including the places, dates, and contents of advertisements or 
postings, and the compensation terms (if not included in contents of 
advertisements and postings). These employers must also summarize in 
the public disclosure file the principal recruitment methods used and 
the time frame within which the recruitment was conducted. As discussed 
above at section IV.E.5 of the preamble to this Rule, the NPRM 
requested comments on how employers should determine industry-wide 
standards, and how to make this determination available to U.S. 
workers. (See IV.E.1, E.5.) Inasmuch as the requirements are based on 
industry-wide standards, meeting this statutory standard should not 
impose significant burdens on affected employers in most cases. To 
ascertain whether employers have given good faith consideration to U.S. 
worker/applicants, the Interim Final Rule also requires the retention 
of applications and related documents, rating forms, job offers, etc. 
Retention of such records already is required by EEOC, so no additional 
burden will be imposed. (See IV.D.8, above.)
    All employers of H-1B workers must offer fringe benefits to H-1B 
workers on the same basis and terms as offered to similarly-employed 
U.S. workers. To document that they have done so, employers must keep 
copies of their fringe benefit plans and summary plan descriptions, 
including rules on eligibility and benefits, evidence of what benefits 
are actually provided to workers, and how costs are shared between 
employers and employees. Because regulations of the Pension and Welfare 
Benefits Administration and the Internal Revenue Service generally 
require employers to keep copies of such fringe benefit information, 
meeting this requirement should not impose any additional burdens on 
most affected employers, and in the few cases where such information is 
not currently retained, it is anticipated that the additional burden 
will be minor. (See IV.G.1, above.)
    As noted in the initial analysis, the Department republished and 
asked for comment on several provisions of the December 20, 1994 Final 
Rule (59 FR 65646) that were published for notice and comment on 
October 31, 1995 (60 FR 55339). As explained above, H-1B workers are 
required to be paid at least the actual wage or the prevailing wage, 
whichever is higher. To ensure this requirement is met, employers are 
required to include in the public access file documents explaining 
their actual wage system, and to maintain payroll records for the 
specific employment in question for both their H-1B workers and their 
U.S. workers. The Interim Final Rule revises the proposal to require 
that hours worked records be retained with respect to U.S. workers only 
if the employee is not paid on a salary basis or the actual wage is 
expressed as an hourly rate, and further that hours worked records be 
kept for H-1B workers only if the worker is part-time or is not paid on 
a salary basis. In virtually all cases, these employees would be paid 
hourly and hourly pay records would therefore be kept. (See IV.O.4, 
above.)

5. Are There any Federal Rules That Duplicate, Overlap or Conflict With 
the Interim Final Rule?

    There are no Federal rules that directly duplicate, overlap or 
conflict with the Interim Final Rule. Title VII of the Civil Rights Act 
of 1964 (42 U.S.C. 2000e et seq.), enforced by the EEOC, prohibits 
national origin discrimination by employers with 15 or more employees 
(see 29 CFR part 1606). The Immigration Reform and Control Act of 1986 
(see 8 U.S.C. 1324b; 8 U.S.C. 1103(a)), enforced by the U.S. Department 
of Justice, prohibits national origin discrimination by employers with 
between four and fourteen employees (those not covered by Title VII), 
and citizenship-status discrimination by employers with at least four 
employees (see 28 CFR part 44). In addition, under the ACWIA, an ``H-1B 
dependent'' employer must attest that it has taken good faith steps to 
recruit in the U.S. for the position for which it is seeking the H-1B 
worker, and that it has offered the job to any U.S. worker/applicant 
who is equally or better qualified. The Department of Labor is 
responsible for enforcing the required recruitment, and the Department 
of Justice is responsible for administering an arbitration process 
detailed in the ACWIA if U.S. worker/applicants complain that they were 
not offered a job for which they were equally or better qualified, as 
required.

6. Are There Significant Alternatives Available Such as Differing 
Compliance or Reporting Requirements or Timetables for Small Entities?

    The compliance and reporting requirements of the Interim Final 
Rule, together with those significant alternatives which have been 
identified, are discussed in the ``Supplementary Information'' section 
of the preamble above. Different timetables for implementing the 
statutory requirements for smaller businesses would not be consistent 
with the statute. The statute temporarily increases the maximum 
allowable number of nonimmigrants that may be admitted into the U.S. to 
perform specialized jobs not filled by U.S. workers, and temporarily 
adds corresponding provisions intended to protect the wages and working 
conditions of U.S. workers in similar jobs during the same period.

7. Can Compliance and Reporting Requirements Be Clarified, 
Consolidated, or Simplified Under the Interim Final Rule for Small 
Entities?

    The compliance and reporting requirements of the Interim Final 
Rule, and each of the alternatives considered together with their 
expected advantages and disadvantages, are described in the preamble 
above. The Department has attempted to keep new recordkeeping 
requirements to the minimum necessary for the Department to ascertain 
compliance and for the public to be aware of the primary documentation 
relied on by the employer to satisfy the statutory requirements. (See 
Section 212(n)(1) of the INA.) Moreover, most of the recordkeeping 
requirements already are imposed by other statutes, or only require 
retention of documents which, in any event, would be kept as a matter 
of prudent business practice.
    Upon further review and consideration if the comments received, the 
Department has clarified several aspects of the rule. Among other items 
clarified are the documents to be kept in the public disclosure file 
and other documents which, in contrast, need not be segregated within 
the employer's system of records. (See Sec. 655.760.)
    In this connection, the Department also considered the use of 
performance rather than design standards in the regulations. The 
proposed rules discussed such alternatives, such as establishing a 
presumption of good faith recruitment based on the employer's hiring a 
significant number of U.S.

[[Page 80208]]

workers and, thereby, accomplishing a significant reduction in the 
ratio of H-1B workers to U.S. workers in the employer's workforce. (See 
IV.E.1, E.2, above.) The comments received on these proposals were 
negative and these alternatives were not included in the Interim Final 
Rule.

8. Can Small Entities Be Exempted From Coverage of the Rule, or Any 
Part of the Rule?

    Exemption from coverage under this Interim Final Rule for small 
entities would not be appropriate under the terms of the controlling H-
1B statutory mandates. The ACWIA contains no authority for the 
Department to grant such an exemption except to the extent that the 
statute itself grants an exemption (e.g., the definition of ``H-1B-
dependent employer''). Further, as discussed above, the Department 
believes that the impact on small businesses will not require 
significant, additional expenditures. The direct, incremental costs 
associated with the customary and usual business expenses for 
recruiting qualified job applicants and retaining qualified employees 
in specialized jobs should be minimally affected by implementation of 
this Rule. Most employers, including the smallest entities, should 
already have systems in place to meet the additional requirements 
prescribed by the ACWIA and this Rule.

VII. Small Business Regulatory Enforcement Fairness Act

    The Department, in the NPRM, concluded that the proposed rule is 
not a ``major rule'' within the meaning of the Small Business 
Regulatory Enforcement Fairness Act of 1996 (SBREFA), 5 U.S.C. 801 et 
seq.. The rule will not likely result in (1) an annual effect on the 
economy of $100 million or more; (2) a major increase in costs or 
prices for consumers, individual industries, Federal, State or local 
government agencies, or geographic regions; or (3) significant adverse 
effects on competition, employment, investment, productivity, 
innovation, or on the ability of U.S. based enterprises to compete with 
foreign-based enterprises in domestic or export markets.
    Five commenters (ACIP, AILA, Hammond, ITAA and SBSC) responded to 
the Department's conclusion that this rule is not a ``major rule'' 
within the meaning of SBREFA. The commenters generally focused on their 
belief that the Department has underestimated the costs to employers of 
complying with the rule. They asserted that a reasonable, reliable 
estimate of costs would show that the rule is a major one requiring 
approval by Congress. ACIP and AILA contended that the Department has 
underestimated the cost of this rule to employers because it has not 
included in its analysis the costs to employers for legal services, 
training materials, computers, files and other systems necessary for 
compliance.
    The Department believes that employer compliance with the 
additional requirements of the ACWIA will not require significant, 
additional expenditures as suggested by commenters. The direct, 
incremental costs associated with the customary and usual business 
expenses for recruiting qualified job applicants and retaining 
qualified employees in specialized jobs should be minimally affected by 
implementation of this rule. Those systems needed for compliance with 
the few additional requirements of the ACWIA should largely already be 
in place. The Department has concluded that collectively, the changes 
set forth in this Rule will not have an economically significant 
impact, and therefore the Rule is not a major rule under SBREFA.

VIII. Unfunded Mandates Reform Act of 1995; Executive Order 13132

    Title II of the Unfunded Mandates Reform Act of 1995 (2 U.S.C. 1531 
et seq.) directs agencies to assess the effects of Federal regulatory 
actions on State, local, and tribal governments, and the private 
sector, ``* * * (other than to the extent that such regulations 
incorporate requirements specifically set forth in law).'' The 
Department concluded in the NPRM that for purposes of the Unfunded 
Mandates Reform Act, this rule does not include any Federal mandate 
that may result in increased annual expenditures in excess of $100 
million by State, local or tribal governments in the aggregate, or by 
the private sector. Moreover, the requirements of the Unfunded Mandates 
Reform Act do not apply to this Rule because it does not include a 
``Federal mandate,'' which is defined to included either a ``Federal 
intergovernmental mandate'' or a ``Federal private sector mandate.'' 2 
U.S.C. 658(6). Except in limited circumstances not applicable here, 
those terms do not include ``a duty arising from participation in a 
voluntary program.'' 2 U.S.C. 658(5)(A)(I)(II) and 7(A)(ii). A decision 
by an employer to obtain an H-1B worker is purely voluntary and the 
obligations arise ``from participation in a voluntary Federal 
program.''
    AILA specifically took issue with the Department's description of 
the H-1B program as ``voluntary.'' AILA believes that there is very 
little that is ``voluntary'' about the H-1B program. Rather, that group 
asserts, Congress recognized an urgent need for additional qualified 
professionals in certain fields and responded to that need by enacting 
ACWIA. AILA describes the H-1B program as a ``government monopoly'' 
where businesses have no choice but to accept the burdensome 
requirements of the program if they are to obtain the highly skilled 
foreign workers necessary for their economic survival. While from an 
employer's perspective, use of the H-1B visa program may be an economic 
necessity, participation in the program remains voluntary since it 
applies only to employers who choose to participate in the program.
    In addition, the Rule will not have substantial direct effects on 
the States, on the relationship between the National Government and the 
States, or on the distribution of power and responsibilities among the 
various levels of government, within the meaning of Executive Order 
13132. Therefore, in accordance with Executive Order 13132, it is 
determined that this rule does not have sufficient federalism 
implications to warrant the preparation of a federalism summary impact 
statement.

IX. Catalog of Federal Domestic Assistance Number

    This program is listed in the Catalog of Federal Domestic 
Assistance at 17.252.

List of Subjects in 20 CFR Parts 655 and 656

    Administrative practice and procedure, Agriculture, Aliens, 
Employment, Forest and forest products, Health professions, 
Immigration, Labor, Longshore work, Migrant labor, Penalties, Reporting 
requirements, Students, Wages.

The Interim Final Rule

    Parts 655 and 656 of Chapter V of Title 20, Code of Federal 
Regulations, are amended as follows:

PART 655--TEMPORARY EMPLOYMENT OF ALIENS IN THE UNITED STATES

    1. The table of contents for part 655, subparts H and I, is revised 
to read as follows:
Subpart H--Labor Condition Applications and Requirements for Employers 
Using Nonimmigrants on H-1B Visas in Specialty Occupations and as 
Fashion Models
655.700   What statutory provisions govern the employment of H-1B 
nonimmigrants and how do employers apply for an H-1B visa?
655.705   What federal agencies are involved in the H-1B program, 
and what are the

[[Page 80209]]

responsibilities of those agencies and of employers?
655.710   What is the procedure for filing a complaint?
655.715   Definitions
655.720   Where are labor condition applications to be filed and 
processed?
655.721   What are the addresses of the ETA regional offices which 
handle matters other than processing LCAs?
655.730   What is the process for filing a labor condition 
application?
655.731   What is the first LCA requirement, regarding wages?
655.732   What is the second LCA requirement, regarding working 
conditions?
655.733   What is the third LCA requirement, regarding strikes and 
lockouts?
655.734   What is the fourth LCA requirement, regarding notice?
655.735   What are the special provisions for short-term placement 
of H-1B nonimmigrants at place(s) of employment outside the area(s) 
of intended employment listed on the LCA?
655.736   What are H-1B-dependent employers and willful violators?
655.737   What are ``exempt'' H-1B nonimmigrants, and how does their 
employment affect the additional attestation obligations of H-1B-
dependent employers and willful violator employers?
655.738   What are the ``non-displacement of U.S. workers'' 
obligations that apply to H-1B-dependent employers and willful 
violators, and how do they operate?
655.739   What is the ``recruitment of U.S. workers'' obligation 
that applies to H-1B-dependent employers and willful violators, and 
how does it operate?
655.740   What actions are taken on labor condition applications?
655.750   What is the validity period of the labor condition 
application?
655.760   What records are to be made available to the public, and 
what records are to be retained?
Subpart I--Enforcement of H-1B Labor Condition Applications
655.800   Who will enforce the LCAs and how will they be enforced?
655.801   What protection do employees have from retaliation?
655.805   What violations may the Administrator investigate?
655.806   Who may file a complaint and how is it processed?
655.807   How may someone who is not an ``aggrieved party'' allege 
violations, and how will those allegations be processed?
655.808   Under what circumstances may random investigations be 
conducted?
655.810   What remedies may be ordered if violations are found?
655.815   What are the requirements for the Administrator's 
determination?
655.820   How is a hearing requested?
655.825   What rules of practice apply to the hearing?
655.830   What rules apply to service of pleadings?
655.835   How will the administrative law judge conduct the 
proceeding?
655.840   What are the requirements for a decision and order of the 
administrative law judge?
655.845   What rules apply to appeal of the decision of the 
administrative law judge?
655.850   Who has custody of the administrative record?
655.855   What notice shall be given to the Employment and Training 
Administration and the Attorney General of the decision regarding 
violations?


    2. The authority citation for Part 655 is revised to read as 
follows:

    Authority: Section 655.0 issued under 8 U.S.C. 1101(a)(15)(H)(i) 
and (ii), 1182(m) and (n), 1184, 1188, and 1288(c) and (d); 29 
U.S.C. 49 et seq.; sec. 3(c)(1), Pub.L. 101-238, 103 Stat. 2099, 
2102 (8 U.S.C. 1182 note); sec. 221(a), Pub.L. 101-649, 104 Stat. 
4978, 5027 (8 U.S.C. 1184 note); sec. 323, Pub.L. 103-206, 107 Stat. 
2149; Title IV, Pub.L. 105-277, 112 Stat. 2681; Pub.L. 106-95, 113 
Stat. 1312 (8 U.S.C. 1182 note); and 8 CFR 213.2(h)(4)(i).
    Section 655.00 issued under 8 U.S.C. 1101(a)(15)(H)(ii), 1184, 
and 1188; 29 U.S.C. 49 et seq.; and 8 CFR 214.2(h)(4)(i).
    Subparts A and C issued under 8 U.S.C. 1101(a)(150(H)(ii)(b) and 
1184; 29 U.S.C. 49 et seq.; and 8 CFR 214.2(h)(4)(i).
    Subpart B issued under 8 U.S.C. 1101(a)(15)(H)(ii)(a), 1184, and 
1188; and 29 U.S.C. 49 et seq.
    Subparts D and E issued under 8 U.S.C. 1101(a)(15)(H)(i)(a), 
1182(m), and 1184; 29 U.S.C. 49 et seq.; and sec. 3(c)(1), Pub.L. 
101-238, 103 Stat. 2099, 2103 (8 U.S.C. 1182 note).
    Subparts F and G issued under 8 U.S.C. 1184 and 1288(c); and 29 
U.S.C. 49 et seq.
    Subparts H and I issued under 8 U.S.C. 1101(a)(15)(H)(i)(b), 
1182(n), and 1184; 29 U.S.C. 49 et seq.; sec 303(a)(8), Pub.L. 102-
232, 105 Stat. 1733, 1748 (8 U.S.C. 1182 note); and Title IV, Pub.L. 
105-277, 112 Stat. 2681.
    Subparts J and K issued under 29 U.S.C. 49 et seq.; and sec 
221(a), Pub.L. 101-649, 104 Stat. 4978, 5027 (8 U.S.C. 1184 note).
    Subparts L and M issued under 8 U.S.C. 1101(a)(15)(H)(i)(c), 
1182 (m) and 1184; and 29 U.S.C. 49 et seq.


    3. Section 655.700 is revised to read as follows:


Sec. 655.700  What statutory provisions govern the employment of H-1B 
nonimmigrants and how do employers apply for an H-1B visa?

    (a) Statutory provisions. With respect to nonimmigrant workers 
entering the United States (U.S.) on H-1B visas, the Immigration and 
Nationality Act (INA), as amended, provides as follows:
    (1) Establishes an annual ceiling (exclusive of spouses and 
children) on the number of foreign workers who may be issued H-1B 
visas--
    (i) 195,000 in fiscal year 2001;
    (ii) 195,000 in fiscal year 2002;
    (iii) 195,000 in fiscal year 2003; and
    (iv) 65,000 in each succeeding fiscal year;
    (2) Defines the scope of eligible occupations for which 
nonimmigrants may be issued H-1B visas and specifies the qualifications 
that are required for entry as an H-1B nonimmigrant ;
    (3) Requires an employer seeking to employ H-1B nonimmigrants to 
file a labor condition application (LCA) agreeing to various 
attestation requirements and have it certified by the Department of 
Labor (DOL) before a nonimmigrant may be provided H-1B status by the 
Immigration and Naturalization Service (INS); and
    (4) Establishes an enforcement system under which DOL is authorized 
to determine whether an employer has engaged in misrepresentation or 
failed to meet a condition of the LCA, and is authorized to impose 
fines and penalties.
    (b) Procedure for obtaining an H-1B visa classification. Before a 
nonimmigrant may be admitted to work in a ``specialty occupation'' or 
as a fashion model of distinguished merit and ability in the United 
States under the H-1B visa classification, there are certain steps 
which must be followed:
    (1) First, an employer shall submit to DOL, and obtain DOL 
certification of, a labor condition application (LCA). The requirements 
for obtaining a certified LCA are provided in this subpart. The LCA 
(Form ETA 9035) and cover page (Form ETA 9035CP, containing the full 
attestation statements that are incorporated by reference in Form ETA 
9035) may be obtained from http://ows.doleta.gov, from DOL regional 
offices, and from the Employment and Training Administration (ETA) 
national office. Employers are encouraged to utilize the electronic 
filing system developed by ETA to expedite the certification process 
(see Sec. 655.720).
    (2) After obtaining DOL certification of an LCA, the employer may 
submit a nonimmigrant visa petition (INS Form I-129), together with the 
certified LCA, to INS, requesting H-1B classification for the foreign 
worker. The requirements concerning the submission of a petition to, 
and its processing by, INS are set forth in INS regulations. The INS 
petition (Form I-129) may be obtained from an INS district or area 
office.
    (3) If INS approves the H-1B classification, the nonimmigrant then 
may apply for an H-1B visa abroad at a consular office of the 
Department of State. If the nonimmigrant is already in the United 
States in a status other than H-1B, he/she may apply to the INS for a 
change of visa status.
    (c) Applicability. (1) This subpart H and subpart I of this part 
apply to all employers seeking to employ foreign workers under the H-1B 
visa

[[Page 80210]]

classification in specialty occupations or as fashion models of 
distinguished merit and ability.
    (2) During the period that the provisions of Appendix 1603.D.4 of 
Annex 1603 of the North American Free Trade Agreement (NAFTA) apply, 
this subpart H and subpart I of this part shall apply (except for the 
provisions relating to the recruitment and displacement of U.S. workers 
(see Secs. 655.738 and 655.739)) to the entry and employment of a 
nonimmigrant who is a citizen of Mexico under and pursuant to the 
provisions of section D or Annex 1603 of NAFTA in the case of all 
professions set out in Appendix 1603.D.1 of Annex 1603 of NAFTA other 
than registered nurses. Therefore, the references in this part to ``H-
1B nonimmigrant'' apply to any Mexican citizen nonimmigrant who is 
classified by INS as ``TN.'' In the case of a registered nurse, the 
following provisions shall apply: subparts D and E of this part or the 
Nursing Relief for Disadvantaged Areas Act of 1999 (Public Law 106-95) 
and the regulations issued thereunder, 20 CFR part 655, subparts L and 
M.

    4. Section 655.705 is revised to read as follows:


Sec. 655.705  What federal agencies are involved in the H-IB program, 
and what are the responsibilities of those agencies and of employers?

    Three federal agencies (Department of Labor, Department of State, 
and Department of Justice) are involved in the process relating to H-1B 
nonimmigrant classification and employment. The employer also has 
continuing responsibilities under the process. This section briefly 
describes the responsibilities of each of these entities.
    (a) Department of Labor (DOL) responsibilities. DOL administers the 
labor condition application process and enforcement provisions 
(exclusive of complaints regarding non-selection of U.S. workers, as 
described in 8 U.S.C. 1182(n)(1)(G)(i)(II) and 1182(n)(5)). Two DOL 
agencies have responsibilities:
    (1) The Employment and Training Administration (ETA) is responsible 
for receiving and certifying labor condition applications (LCAs) in 
accordance with this subpart H. ETA is also responsible for compiling 
and maintaining a list of LCAs and makes such list available for public 
examination at the Department of Labor, 200 Constitution Avenue, NW., 
Room C-4318, Washington, DC 20210.
    (2) The Wage and Hour Division of the Employment Standards 
Administration (ESA) is responsible, in accordance with subpart I of 
this part, for investigating and determining an employer's 
misrepresentation in or failure to comply with LCAs in the employment 
of H-1B nonimmigrants.
    (b) Department of Justice (DOJ) and Department of State (DOS) 
responsibilities. The Department of State, through U.S. Embassies and 
Consulates, is responsible for issuing H-1B visas. The Department of 
Justice, through the Immigration and Naturalization Service (INS), 
accepts the employer's petition (INS Form I-129) with the DOL-certified 
LCA attached. INS is responsible for approving the nonimmigrant's H-1B 
visa classification. In doing so, the INS determines whether the 
petition is supported by an LCA which corresponds with the petition, 
whether the occupation named in the labor condition application is a 
specialty occupation or whether the individual is a fashion model of 
distinguished merit and ability, and whether the qualifications of the 
nonimmigrant meet the statutory requirements for H-1B visa 
classification. If the petition is approved, INS will notify the U.S. 
Consulate where the nonimmigrant intends to apply for the visa unless 
the nonimmigrant is in the U.S. and eligible to adjust status without 
leaving this country. See 8 U.S.C. 1255(h)(2)(B)(i). The Department of 
Justice administers the system for the enforcement and disposition of 
complaints regarding an H-1B-dependent employer's or willful violator 
employer's failure to offer a position filled by an H-1B nonimmigrant 
to an equally or better qualified United States worker (8 U.S.C. 
1182(n)(1)(E), 1182(n)(5)), or such employer's willful 
misrepresentation of material facts relating to this obligation. The 
Department of Justice, through the INS, is responsible for disapproving 
H-1B and other petitions filed by an employer found to have engaged in 
misrepresentation or failed to meet certain conditions of the labor 
condition application (8 U.S.C. 1182(n)(2)(C)(i)-(iii); 1182(n)(5)(E)).
    (c) Employer's responsibilities. Each employer seeking an H-1B 
nonimmigrant in a specialty occupation or as a fashion model of 
distinguished merit and ability has several responsibilities, as 
described more fully in this subpart and subpart I, including--
    (1) The employer shall submit a completed labor condition 
application (LCA) on Form ETA 9035 in the manner prescribed in 
Sec. 655.720. By completing and signing the LCA, the employer agrees to 
several attestations regarding an employer's responsibilities, 
including the wages, working conditions, and benefits to be provided to 
the H-1B nonimmigrants (8 U.S.C. 1182(n)(1)); these attestations are 
specifically identified and incorporated by reference in the LCA, as 
well as being set forth in full on Form ETA 9035CP. The LCA contains 
additional attestations for certain H-1B-dependent employers and 
employers found to have willfully violated the H-1B program 
requirements; these attestations impose certain obligations to recruit 
U.S. workers, to offer positions to U. S. workers who are equally or 
better qualified than the H-1B nonimmigrant(s), and to avoid the 
displacement of U.S. workers (either in the employer's workforce or in 
the workforce of a second employer with whom the H-1B nonimmigrant(s) 
is placed with indicia of employment by that employer (8 U.S.C. 
1182(n)(1)(E)-(G)). These additional attestations are specifically 
identified and incorporated by reference in the LCA, as well as being 
set forth in full on Form ETA 9035CP. If the LCA is certified by ETA, a 
copy will be returned to the employer.
    (2) The employer shall make the LCA and necessary supporting 
documentation (as identified under this subpart) available for public 
examination at the employer's principal place of business in the U.S. 
or at the place of employment within one working day after the date on 
which the LCA is filed with ETA.
    (3) The employer then may submit a copy of the certified LCA to INS 
with a completed petition (INS Form I-129) requesting H-1B 
classification.
    (4) The employer shall not allow the nonimmigrant worker to begin 
work until INS grants the worker authorization to work in the United 
States for that employer or, in the case of a nonimmigrant who is 
already in H-1B status and is changing employment to another H-1B 
employer, until the new employer files a petition supported by a 
certified LCA.
    (5) The employer shall develop sufficient documentation to meet its 
burden of proof with respect to the validity of the statements made in 
its LCA and the accuracy of information provided, in the event that 
such statement or information is challenged. The employer shall also 
maintain such documentation at its principal place of business in the 
U.S. and shall make such documentation available to DOL for inspection 
and copying upon request.

    5. Section 655.710 is revised to read as follows:

[[Page 80211]]

Sec. 655.710  What is the procedure for filing a complaint?

    (a) Except as provided in paragraph (b) of this section, complaints 
concerning misrepresentation in the labor condition application or 
failure of the employer to meet a condition specified in the 
application shall be filed with the Administrator, Wage and Hour 
Division (Administrator), ESA, according to the procedures set forth in 
subpart I of this part. The Administrator shall investigate where 
appropriate, and after an opportunity for a hearing, assess appropriate 
sanctions and penalties, as described in subpart I of this part.
    (b) Complaints arising under section 212(n)(1)(G)(i)(II) of the 
INA, 8 U.S.C. 1182(n)(1)(G)(i)(II), alleging failure of the employer to 
offer employment to an equally or better qualified U.S. worker, or an 
employer's misrepresentation regarding such offer(s) of employment, may 
be filed with the Department of Justice, 10th Street & Constitution 
Avenue, NW., Washington, DC 20530. The Department of Justice shall 
investigate where appropriate and shall take such further action as may 
be appropriate under that Department's regulations and procedures.

    6. Section Sec. 655.715 is amended to revise the definition of 
``Area of intended employment'', to add the definition of ``Employed, 
employed by the employer or employment relationship'', to revise the 
definition of ``Employer'', to revise the definition of ``Employment 
and Training Administration (ETA)'', to add the definition of ``Office 
of Workforce Security (OWS)'', to revise the definitions of ``Place of 
employment'' and ``State Employment Security Agency (SESA)'', to remove 
the definition of ``United States Employment Service'', and to add the 
definition of ``United States worker (U.S. worker)'', to read as 
follows:


Sec. 655.715  Definitions.

    Area of intended employment means the area within normal commuting 
distance of the place (address) of employment where the H-1B 
nonimmigrant is or will be employed. There is no rigid measure of 
distance which constitutes a normal commuting distance or normal 
commuting area, because there may be widely varying factual 
circumstances among different areas (e.g., normal commuting distances 
might be 20, 30, or 50 miles). If the place of employment is within a 
Metropolitan Statistical Area (MSA) or a Primary Metropolitan 
Statistical Area (PMSA), any place within the MSA or PMSA is deemed to 
be within normal commuting distance of the place of employment; 
however, all locations within a Consolidated Metropolitan Statistical 
Area (CMSA) will not automatically be deemed to be within normal 
commuting distance. The borders of MSAs and PMSAs are not controlling 
with regard to the identification of the normal commuting area; a 
location outside of an MSA or PMSA (or a CMSA) may be within normal 
commuting distance of a location that is inside (e.g., near the border 
of) the MSA or PMSA (or CMSA).
* * * * *
    Employed, employed by the employer, or employment relationship 
means the employment relationship as determined under the common law, 
under which the key determinant is the putative employer's right to 
control the means and manner in which the work is performed. Under the 
common law, ``no shorthand formula or magic phrase * * * can be applied 
to find the answer * * *. [A]ll of the incidents of the relationship 
must be assessed and weighed with no one factor being decisive.'' NLRB 
v. United Ins. Co. of America, 390 U.S. 254, 258 (1968).
    Employer means a person, firm, corporation, contractor, or other 
association or organization in the United States which has an 
employment relationship with H-1B nonimmigrants and/or U.S. worker(s). 
The person, firm, contractor, or other association or organization in 
the United States which files a petition on behalf of an H-1B 
nonimmigrant is deemed to be the employer of that H-1B nonimmigrant.
    Employment and Training Administration (ETA) means the agency 
within the Department which includes the Office of Workforce Security 
(OWS).
* * * * *
    Office of Workforce Security (OWS) means the agency of the 
Department which is charged with administering the national system of 
public employment offices.
    Place of employment means the worksite or physical location where 
the work actually is performed.
    (1) The term does not include any location where either of the 
following criteria--paragraph (1)(i) or (ii)--is satisfied:
    (i) Employee developmental activity. An H-1B worker who is 
stationed and regularly works at one location may temporarily be at 
another location for a particular individual or employer-required 
developmental activity such as a management conference, a staff 
seminar, or a formal training course (other than ``on-the-job-
training'' at a location where the employee is stationed and regularly 
works). For the H-1B worker participating in such activities, the 
location of the activity would not be considered a ``place of 
employment'' or ``worksite,'' and that worker's presence at such 
location--whether owned or controlled by the employer or by a third 
party--would not invoke H-1B program requirements with regard to that 
employee at that location. However, if the employer uses H-1B 
nonimmigrants as instructors or resource or support staff who 
continuously or regularly perform their duties at such locations, the 
locations would be ``places of employment'' or ``worksites'' for any 
such employees and, thus, would be subject to H-1B program requirements 
with regard to those employees.
    (ii) Particular worker's job functions. The nature and duration of 
an H-1B nonimmigrant's job functions may necessitate frequent changes 
of location with little time spent at any one location. For such a 
worker, a location would not be considered a ``place of employment'' or 
``worksite'' if the following three requirements (i.e., paragraphs 
(1)(ii)(A) through (C)) are all met--
    (A) The nature and duration of the H-1B worker's job functions 
mandates his/her short-time presence at the location. For this purpose, 
either:
    (1) The H-1B nonimmigrant's job must be peripatetic in nature, in 
that the normal duties of the worker's occupation (rather than the 
nature of the employer's business) requires frequent travel (local or 
non-local) from location to location; or
    (2) The H-1B worker's duties must require that he/she spend most 
work time at one location but occasionally travel for short periods to 
work at other locations; and
    (B) The H-1B worker's presence at the locations to which he/she 
travels from the ``home'' worksite is on a casual, short-term basis, 
which can be recurring but not excessive (i.e., not exceeding five 
consecutive workdays for any one visit by a peripatetic worker, or 10 
consecutive workdays for any one visit by a worker who spends most work 
time at one location and travels occasionally to other locations); and
    (C) The H-1B nonimmigrant is not at the location as a 
``strikebreaker'' (i.e., the H-1B nonimmigrant is not performing work 
in an occupation in which workers are on strike or lockout).
    (2) Examples of ``non-worksite'' locations based on worker's job 
functions: A computer engineer sent out to customer locations to 
``troubleshoot'' complaints regarding software malfunctions; a sales 
representative

[[Page 80212]]

making calls on prospective customers or established customers within a 
``home office'' sales territory; a manager monitoring the performance 
of out-stationed employees; an auditor providing advice or conducting 
reviews at customer facilities; a physical therapist providing services 
to patients in their homes within an area of employment; an individual 
making a court appearance; an individual lunching with a customer 
representative at a restaurant; or an individual conducting research at 
a library.
    (3) Examples of ``worksite'' locations based on worker's job 
functions: A computer engineer who works on projects or accounts at 
different locations for weeks or months at a time; a sales 
representative assigned on a continuing basis in an area away from his/
her ``home office;'' an auditor who works for extended periods at the 
customer's offices; a physical therapist who ``fills in'' for full-time 
employees of health care facilities for extended periods; or a physical 
therapist who works for a contractor whose business is to provide 
staffing on an ``as needed'' basis at hospitals, nursing homes, or 
clinics.
    (4) Whenever an H-1B worker performs work at a location which is 
not a ``worksite'' (under the criterion in paragraph (1)(i) or (1)(ii) 
of this definition), that worker's ``place of employment'' or 
``worksite'' for purposes of H-1B obligations is the worker's home 
station or regular work location. The employer's obligations regarding 
notice, prevailing wage and working conditions are focused on the home 
station ``place of employment'' rather than on the above-described 
location(s) which do not constitute worksite(s) for these purposes. 
However, whether or not a location is considered to be a ``worksite''/
''place of employment'' for an H-1B nonimmigrant, the employer is 
required to provide reimbursement to the H-1B nonimmigrant for expenses 
incurred in traveling to that location on the employer's business, 
since such expenses are considered to be ordinary business expenses of 
employers (Secs. 655.731(c)(7)(iii)(C); 655.731(c)(9)). In determining 
the worker's ``place of employment'' or ``worksite,'' the Department 
will look carefully at situations which appear to be contrived or 
abusive; the Department would seriously question any situation where 
the H-1B nonimmigrant's purported ``place of employment'' is a location 
other than where the worker spends most of his/her work time, or where 
the purported ``area of employment'' does not include the location(s) 
where the worker spends most of his/her work time.
* * * * *
    State Employment Security Agency (SESA) means the State agency 
designated under section 4 of the Wagner-Peyser Act to cooperate with 
OWS in the operation of the national system of public employment 
offices.
* * * * *
    United States worker (``U.S. worker'') means an employee who is 
either
    (1) A citizen or national of the United States, or
    (2) An alien who is lawfully admitted for permanent residence in 
the United States, is admitted as a refugee under section 207 of the 
INA, is granted asylum under section 208 of the INA, or is an immigrant 
otherwise authorized (by the INA or by the Attorney General) to be 
employed in the United States.

    7. Section 655.720 is revised to read as follows:


Sec. 655.720  Where are labor condition applications to be filed and 
processed?

    (a) Facsimile transmission (FAX). If the employer submits the LCA 
(Form ETA 9035) by FAX, the transmission shall be made to 1-800-397-
0478 (regardless of the intended place of employment for the H-1B 
nonimmigrant(s)). (Note to paragraph (a): The employer submitting an 
LCA via FAX shall not use the FAX number assigned to an ETA regional 
office, but shall use only the 1-800-397-0478 number designated for 
this purpose.) The cover pages to Form ETA 9035 (i.e., Form ETA 9035CP) 
should not be FAXed with the Form ETA 9035.
    (b) U.S. Mail. If the employer submits the LCA (Form ETA 9035) by 
U.S. Mail, the LCA shall be sent to the ETA service center at the 
following address: ETA Application Processing Center, P.O. Box 13640, 
Philadelphia PA 19101.
    (c) All matters other than the processing of LCAs (e.g., prevailing 
wage challenges by employers) are within the jurisdiction of the 
Regional Certifying Officers in the ETA regional offices identified in 
Sec. 655.721.

    8. Section 655.721 is added to read as follows:


Sec. 655.721  What are the addresses of the ETA regional offices which 
handle matters other than processing LCAs?

    (a) The Regional Certifying Officers in the ETA regional offices 
are responsible for administrative matters under this subpart other 
than the processing of LCAs (e.g., prevailing wage challenges by 
employers). (Note to paragraph (a): LCAs are filed by employers and 
processed by ETA only in accordance with Sec. 655.720.)
    (b) The ETA regional offices with responsibility for labor 
certification programs are--
    (1) Region I Boston (Connecticut, Maine, Massachusetts, New 
Hampshire, Rhode Island, and Vermont): J.F.K. Federal Building, Room E-
350, Boston, Massachusetts 02203. Telephone: 617-565-4446.
    (2) Region I New York (New York, New Jersey, Puerto Rico, and the 
Virgin Islands): 201 Varick Street, Room 755, New York, New York 10014. 
Telephone: 212-337-2186.
    (3) Region II ( Delaware, District of Columbia, Maryland, 
Pennsylvania, Virginia, and West Virginia): Suite 825 East, The Curtis 
Center, 170 S. Independence Mall West, Philadelphia, Pennsylvania 
19106-3315. Telephone: 215-861-5250.
    (4) Region III (Alabama, Florida, Georgia, Kentucky, Mississippi, 
North Carolina, South Carolina, and Tennessee): Atlanta Federal Ctr., 
100 Alabama St., NW, Suite 6M-12, Atlanta, Georgia 30303. Telephone: 
404-562-2115.
    (5) Region IV (Arkansas, Colorado, Louisiana, Montana, New Mexico, 
North Dakota, Oklahoma, South Dakota, Texas, Utah, and Wyoming): 525 
Griffin Street, Room 317, Dallas, Texas 75202. Telephone: 214-767-4989.
    (6) Region V (Illinois, Indiana, Iowa, Kansas, Michigan, Minnesota, 
Missouri, Nebraska, Ohio, and Wisconsin): 230 South Dearborn Street, 
Room 605, Chicago, Illinois 60604. Telephone: 312-353-1550.
    (7) Region VI (Alaska, Arizona, California, Guam, Hawaii, Idaho, 
Nevada, Oregon, and Washington): P.O. Box 193767, San Francisco, 
California 94119-3767. Telephone: 415-975-4601.
    (c) The ETA website at http://ows.doleta.gov will be updated to 
reflect any changes in the information contained in this section 
concerning the ETA regional offices.
    9. Section 655.730 is revised to read as follows:


Sec. 655.730  What is the process for filing a labor condition 
application?

    (a) Who must submit labor condition applications? An employer, or 
the employer's authorized agent or representative, which meets the 
definition of ``employer'' set forth in Sec. 655.715 and intends to 
employ an H-1B nonimmigrant in a specialty occupation or as a fashion 
model of distinguished merit and ability shall submit an LCA to the 
Department.
    (b) Where and when is an LCA to be submitted? An LCA shall be 
submitted by the employer to ETA in accordance with the procedure 
prescribed in

[[Page 80213]]

Sec. 655.720 no earlier than six months before the beginning date of 
the period of intended employment shown on the LCA. It is the 
employer's responsibility to ensure that a complete and accurate LCA is 
received by ETA. Incomplete or obviously inaccurate LCAs will not be 
certified by ETA. ETA shall process all LCAs sequentially upon receipt 
regardless of the method used by the employer to submit the LCA (i.e., 
either FAX or U.S. Mail as prescribed in Sec. 655.720) and shall make a 
determination to certify or not certify the LCA within seven working 
days of the date the LCA is received and date stamped by ETA. If the 
LCA is submitted by FAX, the LCA containing the original signature 
shall be maintained by the employer as set forth at Sec. 655.760(a)(1).
    (c) What is to be submitted? Form ETA 9035.
    (1) General. One completed and dated original Form ETA 9035 bearing 
the employer's original signature (or that of the employer's authorized 
agent or representative) shall be submitted by the employer to ETA in 
accordance with the procedure prescribed in Sec. 655.720. The signature 
of the employer or its authorized agent or representative on Form ETA 
9035 acknowledges the employer's agreement to the labor condition 
statements (attestations), which are specifically identified in Form 
ETA 9035 as well as set forth in the cover pages (Form ETA 9035CP) and 
incorporated by reference in Form ETA 9035. The labor condition 
statements (attestations) are described in detail in Secs. 655.731 
through 655.735, and 655.736 through 655.739 (if applicable). Copies of 
Form ETA 9035 and cover pages Form ETA 9035CP are available from ETA 
regional offices and on the ETA website at http://ows.doleta.gov. Each 
Form ETA 9035 shall identify the occupational classification for which 
the LCA is being submitted and shall state:
    (i) The occupation, by Dictionary of Occupational Titles (DOT) 
Three-Digit Occupational Groups code and by the employer's own title 
for the job;
    (ii) The number of H-1B nonimmigrants sought;
    (iii) The gross wage rate to be paid to each H-1B nonimmigrant, 
expressed on an hourly, weekly, biweekly, monthly or annual basis;
    (iv) The starting and ending dates of the H-1B nonimmigrants' 
employment;
    (v) The place(s) of intended employment;
    (vi) The prevailing wage for the occupation in the area of intended 
employment and the specific source (e.g., name of published survey) 
relied upon by the employer to determine the wage. If the wage is 
obtained from a SESA, the appropriate box must be checked and the wage 
must be stated; the source for a wage obtained from a source other than 
a SESA must be identified along with the wage; and
    (vii) The employer's status as to whether or not the employer is H-
1B-dependent and/or a willful violator, and, if the employer is H-1B-
dependent and/or a willful violator, whether the employer will use the 
application only in support of petitions for exempt H-1B nonimmigrants.
    (2) Multiple positions and/or places of employment. The employer 
shall file a separate LCA for each occupation in which the employer 
intends to employ one or more H-1B nonimmigrants, but the LCA may cover 
more than one intended position (employment opportunity) within that 
occupation. All intended places of employment shall be identified on 
the LCA; the employer may file one or more additional LCAs to identify 
additional places of employment.
    (3) Full-time and part-time jobs. The position(s) covered by the 
LCA may be either full-time or part-time; full-time and part-time 
positions cannot be combined on a single LCA.
    (d) What attestations does the LCA contain? An employer's LCA shall 
contain the labor condition statements referenced in Secs. 655.731 
through 655.734, and Sec. 655.736 through 655.739 (if applicable), 
which provide that no individual may be admitted or provided status as 
an H-1B nonimmigrant in an occupational classification unless the 
employer has filed with the Secretary an application stating that:
    (1) The employer is offering and will offer during the period of 
authorized employment to H-1B nonimmigrants no less than the greater of 
the following wages (such offer to include benefits and eligibility for 
benefits provided as compensation for services, which are to be offered 
to the nonimmigrants on the same basis and in accordance with the same 
criteria as the employer offers such benefits to U.S. workers):
    (i) The actual wage paid to the employer's other employees at the 
worksite with similar experience and qualifications for the specific 
employment in question; or
    (ii) The prevailing wage level for the occupational classification 
in the area of intended employment;
    (2) The employer will provide working conditions for such 
nonimmigrants that will not adversely affect the working conditions of 
workers similarly employed (including benefits in the nature of working 
conditions, which are to be offered to the nonimmigrants on the same 
basis and in accordance with the same criteria as the employer offers 
such benefits to U.S. workers);
    (3) There is not a strike or lockout in the course of a labor 
dispute in the occupational classification at the place of employment;
    (4) The employer has provided and will provide notice of the filing 
of the labor condition application to:
    (i)(A) The bargaining representative of the employer's employees in 
the occupational classification in the area of intended employment for 
which the H-1B nonimmigrants are sought, in the manner described in 
Sec. 655.734(a)(1)(i); or
    (B) If there is no such bargaining representative, affected workers 
by providing electronic notice of the filing of the LCA or by posting 
notice in conspicuous locations at the place(s) of employment, in the 
manner described in Sec. 655.734(a)(1)(ii); and
    (ii) H-1B nonimmigrants by providing a copy of the LCA to each H-1B 
nonimmigrant at the time that such nonimmigrant actually reports to 
work, in the manner described in Sec. 655.734(a)(2).
    (5) The employer has determined its status concerning H-1B-
dependency and/or willful violator (as described in Sec. 655.736), has 
indicated such status, and if either such status is applicable to the 
employer, has indicated whether the LCA will be used only for exempt H-
1B nonimmigrant(s), as described in Sec. 655.737.
    (6) The employer has provided the information about the occupation 
required in paragraph (c) of this section.
    (e) Change in employer's corporate structure or identity. (1) Where 
an employer corporation changes its corporate structure as the result 
of an acquisition, merger, ``spin-off,'' or other such action, the new 
employing entity is not required to file new LCAs and H-1B petitions 
with respect to the H-1B nonimmigrants transferred to the employ of the 
new employing entity (regardless of whether there is a change in the 
Employer Identification Number (EIN)), provided that the new employing 
entity maintains in its records a list of the H-1B nonimmigrants 
transferred to the employ of the new employing entity, and maintains in 
the public access file(s) (see Sec. 655.760) a document containing all 
of the following:
    (i) Each affected LCA number and its date of certification;
    (ii) A description of the new employing entity's actual wage system 
applicable to H-1B nonimmigrant(s)

[[Page 80214]]

who become employees of the new employing entity;
    (iii) The employer identification number (EIN) of the new employing 
entity (whether or not different from that of the predecessor entity); 
and
    (iv) A sworn statement by an authorized representative of the new 
employing entity expressly acknowledging such entity's assumption of 
all obligations, liabilities and undertakings arising from or under 
attestations made in each certified and still effective LCA filed by 
the predecessor entity. Unless such statement is executed and made 
available in accordance with this paragraph, the new employing entity 
shall not employ any of the predecessor entity's H-1B nonimmigrants 
without filing new LCAs and petitions for such nonimmigrants. The new 
employing entity's statement shall include such entity's explicit 
agreement to:
    (A) Abide by the DOL's H-1B regulations applicable to the LCAs;
    (B) Maintain a copy of the statement in the public access file (see 
Sec. 655.760); and
    (C) Make the document available to any member of the public or the 
Department upon request.
    (2) Notwithstanding the provisions of paragraph (e)(1) of this 
section, the new employing entity must file new LCA(s) and H-1B 
petition(s) when it hires any new H-1B nonimmigrant(s) or seeks 
extension(s) of H-1B status for existing H-1B nonimmigrant(s). In other 
words, the new employing entity may not utilize the predecessor 
entity's LCA(s) to support the hiring or extension of any H-1B 
nonimmigrant after the change in corporate structure.
    (3) A change in an employer's H-1B-dependency status which results 
from the change in the corporate structure has no effect on the 
employer's obligations with respect to its current H-1B nonimmigrant 
employees. However, the new employing entity shall comply with 
Sec. 655.736 concerning H-1B-dependency and/or willful-violator status 
and Sec. 655.737 concerning exempt H-1B nonimmigrants, in the event 
that such entity seeks to hire new H-1B nonimmigrant(s) or to extend 
the H-1B status of existing H-1B nonimmigrants. (See 
Sec. 655.736(d)(6).)
    10. Section 655.731 is revised to read as follows:


Sec. 655.731  What is the first LCA requirement, regarding wages?

    An employer seeking to employ H-1B nonimmigrants in a specialty 
occupation or as a fashion model of distinguished merit and ability 
shall state on Form ETA 9035 that it will pay the H-1B nonimmigrant the 
required wage rate.
    (a) Establishing the wage requirement. The first LCA requirement 
shall be satisfied when the employer signs Form ETA 9035 attesting 
that, for the entire period of authorized employment, the required wage 
rate will be paid to the H-1B nonimmigrant(s); that is, that the wage 
shall be the greater of the actual wage rate (as specified in paragraph 
(a)(1) of this section) or the prevailing wage (as specified in 
paragraph (a)(2) of this section). The wage requirement includes the 
employer's obligation to offer benefits and eligibility for benefits 
provided as compensation for services to H-1B nonimmigrants on the same 
basis, and in accordance with the same criteria, as the employer offers 
to U.S. workers.
    (1) The actual wage is the wage rate paid by the employer to all 
other individuals with similar experience and qualifications for the 
specific employment in question. In determining such wage level, the 
following factors may be considered: Experience, qualifications, 
education, job responsibility and function, specialized knowledge, and 
other legitimate business factors. ``Legitimate business factors,'' for 
purposes of this section, means those that it is reasonable to conclude 
are necessary because they conform to recognized principles or can be 
demonstrated by accepted rules and standards. Where there are other 
employees with substantially similar experience and qualifications in 
the specific employment in question--i.e., they have substantially the 
same duties and responsibilities as the H-1B nonimmigrant--the actual 
wage shall be the amount paid to these other employees. Where no such 
other employees exist at the place of employment, the actual wage shall 
be the wage paid to the H-1B nonimmigrant by the employer. Where the 
employer's pay system or scale provides for adjustments during the 
period of the LCA--e.g., cost of living increases or other periodic 
adjustments, or the employee moves to a more advanced level in the same 
occupation--such adjustments shall be provided to similarly employed H-
1B nonimmigrants (unless the prevailing wage is higher than the actual 
wage).
    (2) The prevailing wage for the occupational classification in the 
area of intended employment must be determined as of the time of filing 
the application. The employer shall base the prevailing wage on the 
best information as of the time of filing the application. Except as 
provided in paragraph (a)(3) of this section, the employer is not 
required to use any specific methodology to determine the prevailing 
wage and may utilize a SESA, an independent authoritative source, or 
other legitimate sources of data. One of the following sources shall be 
used to establish the prevailing wage:
    (i) A wage determination for the occupation and area issued under 
one of the following statutes (which shall be available through the 
SESA):
    (A) The Davis-Bacon Act, 40 U.S.C. 276a et seq. (see also 29 CFR 
part 1), or
    (B) The McNamara-O'Hara Service Contract Act, 41 U.S.C. 351 et seq. 
(SCA) (see also 29 CFR part 4). The following provisions apply to the 
use of the SCA wage rate as the prevailing wage:
    (1) Where an SCA wage determination for an occupational 
classification in the computer industry states a rate of $27.63, that 
rate will not be issued by the SESA and may not be used by the employer 
as the prevailing wage; that rate does not represent the actual 
prevailing wage but, instead, is reported by the Wage and Hour Division 
in the SCA determination merely as an artificial ``cap'' in the SCA-
required wage that results from an SCA exemption provision (see 41 
U.S.C. 357(b); 29 CFR 541.3). In such circumstances, the SESA and the 
employer must consult another source for wage information (e.g., Bureau 
of Labor Statistics' Occupational Employment Statistics Survey).
    (2) Except as provided in paragraph (a)(2)(i)(B)(1) of this 
section, for purposes of the determination of the H-1B prevailing wage 
for an occupational classification through the use of an SCA wage 
determination, it is irrelevant whether a worker is employed on a 
contract subject to the SCA or whether the worker would be exempt from 
the SCA through application of the SCA/FLSA ``professional employee'' 
exemption test (i.e., duties and compensation; see 29 CFR 4.156; 
541.3). Thus, in issuing the SCA wage rate as the prevailing wage 
determination for the occupational classification, the SESA will not 
consider questions of employee exemption, and in an enforcement action, 
the Department will consider the SCA wage rate to be the prevailing 
wage without regard to whether any particular H-1B employee(s) could be 
exempt from that wage as SCA contract workers under the SCA/FLSA 
exemption. An employer who employs H-1B employee(s) to perform services 
under an SCA-covered contract may find that the H-1B employees are 
required to be paid the SCA rate as the H-1B prevailing wage even 
though non-H-1B employees

[[Page 80215]]

performing the same services may be exempt from the SCA.
    (ii) A union contract which was negotiated at arms-length between a 
union and the employer, which contains a wage rate applicable to the 
occupation; or
    (iii) If the job opportunity is in an occupation which is not 
covered by paragraph (a)(2)(i) or (ii) of this section, the prevailing 
wage shall be the weighted average rate of wages, that is, the rate of 
wages to be determined, to the extent feasible, by adding the wages 
paid to workers similarly employed in the area of intended employment 
and dividing the total by the number of such workers. Since it is not 
always feasible to determine such an average rate of wages with exact 
precision, the wage set forth in the application shall be considered as 
meeting the prevailing wage standard if it is within five percent of 
the average rate of wages. See paragraph (c) of this section, regarding 
payment of required wages. See also paragraph (d)(4) of this section, 
regarding enforcement. The prevailing wage rate under this paragraph 
(a)(2)(iii) shall be based on the best information available. The 
Department believes that the following prevailing wage sources are, in 
order of priority, the most accurate and reliable:
    (A) A SESA Determination. Upon receipt of a written request for a 
prevailing wage determination, the SESA will determine whether the 
occupation is covered by a Davis-Bacon or Service Contract Act wage 
determination, and, if not, whether it has on file current prevailing 
wage information for the occupation. This information will be provided 
by the SESA to the employer in writing in a timely manner. Where the 
prevailing wage is not immediately available, the SESA will determine 
the prevailing wage using the methods outlined at 20 CFR 656.40 and 
other administrative guidelines or regulations issued by ETA. The SESA 
shall specify the validity period of the prevailing wage, which shall 
in no event be for less than 90 days or more than one year from the 
date of the SESA's issuance of the determination.
    (1) An employer who chooses to utilize a SESA prevailing wage 
determination shall file the labor condition application within the 
validity period of the prevailing wage as specified on the 
determination. Once an employer obtains a prevailing wage determination 
from the SESA and files an LCA supported by that prevailing wage 
determination, the employer is deemed to have accepted the prevailing 
wage determination (as to the amount of the wage) and thereafter may 
not contest the legitimacy of the prevailing wage determination through 
the Employment Service complaint system or in an investigation or 
enforcement action. Prior to filing the LCA, the employer may challenge 
a SESA prevailing wage determination through the Employment Service 
complaint system, by filing a complaint with the SESA. See subpart E of 
20 CFR part 658. Employers which challenge a SESA prevailing wage 
determination must obtain a final ruling from the Employment Service 
complaint system prior to filing an LCA based on such determination. In 
any challenge, the SESA shall not divulge any employer wage data which 
was collected under the promise of confidentiality.
    (2) If the employer is unable to wait for the SESA to produce the 
requested prevailing wage determination for the occupation in question, 
or for the Employment Service complaint system process to be completed, 
the employer may rely on other legitimate sources of available wage 
information in filing the LCA, as set forth in paragraph (a)(2)(iii)(B) 
and (C) of this section. If the employer later discovers, upon receipt 
of a prevailing wage determination from the SESA, that the information 
relied upon produced a wage that was below the prevailing wage for the 
occupation in the area of intended employment and the employer was 
paying below the SESA-determined wage, no wage violation will be found 
if the employer retroactively compensates the H-1B nonimmigrant(s) for 
the difference between the wage paid and the prevailing wage, within 30 
days of the employer's receipt of the SESA determination.
    (3) In all situations where the employer obtains the prevailing 
wage determination from the SESA, the Department will accept that 
prevailing wage determination as correct (as to the amount of the wage) 
and will not question its validity where the employer has maintained a 
copy of the SESA prevailing wage determination. A complaint alleging 
inaccuracy of a SESA prevailing wage determination, in such cases, will 
not be investigated.
    (B) An independent authoritative source. The employer may use an 
independent authoritative wage source in lieu of a SESA prevailing wage 
determination. The independent authoritative source survey must meet 
all the criteria set forth in paragraph (b)(3)(iii)(B) of this section.
    (C) Another legitimate source of wage information. The employer may 
rely on other legitimate sources of wage data to obtain the prevailing 
wage. The other legitimate source survey must meet all the criteria set 
forth in paragraph (b)(3)(iii)(C) of this section. The employer will be 
required to demonstrate the legitimacy of the wage in the event of an 
investigation.
    (iv) For purposes of this section, ``similarly employed'' means 
``having substantially comparable jobs in the occupational 
classification in the area of intended employment,'' except that if no 
such workers are employed by employers other than the employer 
applicant in the area of intended employment, ``similarly employed'' 
means:
    (A) Having jobs requiring a substantially similar level of skills 
within the area of intended employment; or
    (B) If there are no substantially comparable jobs in the area of 
intended employment, having substantially comparable jobs with 
employers outside of the area of intended employment.
    (v) A prevailing wage determination for LCA purposes made pursuant 
to this section shall not permit an employer to pay a wage lower than 
that required under any other applicable Federal, State or local law.
    (vi) Where a range of wages is paid by the employer to individuals 
in an occupational classification or among individuals with similar 
experience and qualifications for the specific employment in question, 
a range is considered to meet the prevailing wage requirement so long 
as the bottom of the wage range is at least the prevailing wage rate.
    (vii) The employer shall enter the prevailing wage on the LCA in 
the form in which the employer will pay the wage (i.e., either a salary 
or an hourly rate), except that in all cases the prevailing wage must 
be expressed as an hourly wage if the H-1B nonimmigrant will be 
employed part-time. Where an employer obtains a prevailing wage 
determination (from any of the sources identified in paragraph 
(a)(2)(i) through (iii) of this section) that is expressed as an hourly 
rate, the employer may convert this determination to a salary by 
multiplying the hourly rate by 2080. Conversely, where an employer 
obtains a prevailing wage (from any of these sources) that is expressed 
as a salary, the employer may convert this determination to an hourly 
rate by dividing the salary by 2080.
    (viii) In computing the prevailing wage for a job opportunity in an 
occupational classification in an area of intended employment in the 
case of an employee of an institution of higher education or an 
affiliated or related nonprofit entity , a nonprofit research

[[Page 80216]]

organization, or a Governmental research organization as these terms 
are defined in 20 CFR 656.40(c), the prevailing wage level shall only 
take into account employees at such institutions and organizations in 
the area of intended employment.
    (ix) An employer may file more than one LCA for the same 
occupational classification in the same area of employment and, in such 
circumstances, the employer could have H-1B employees in the same 
occupational classification in the same area of employment, brought 
into the U.S. (or accorded H-1B status) based on petitions approved 
pursuant to different LCAs (filed at different times) with different 
prevailing wage determinations. Employers are advised that the 
prevailing wage rate as to any particular H-1B nonimmigrant is 
prescribed by the LCA which supports that nonimmigrant's H-1B petition. 
The employer is required to obtain the prevailing wage at the time that 
the LCA is filed (see paragraph (a)(2) of this section). The LCA is 
valid for the period certified by ETA, and the employer must satisfy 
all the LCA's requirements (including the required wage which 
encompasses both prevailing and actual wage rates) for as long as any 
H-1B nonimmigrants are employed pursuant to that LCA (Sec. 655.750). 
Where new nonimmigrants are employed pursuant to a new LCA, that new 
LCA prescribes the employer's obligations as to those new 
nonimmigrants. The prevailing wage determination on the later/
subsequent LCA does not ``relate back'' to operate as an ``update'' of 
the prevailing wage for the previously-filed LCA for the same 
occupational classification in the same area of employment. However, 
employers are cautioned that the actual wage component to the required 
wage may, as a practical matter, eliminate any wage-payment 
differentiation among H-1B employees based on different prevailing wage 
rates stated in applicable LCAs. Every H-1B nonimmigrant is to be paid 
in accordance with the employer's actual wage system, and thus to 
receive any pay increases which that system provides.
    (3) Once the prevailing wage rate is established, the H-1B employer 
then shall compare this wage with the actual wage rate for the specific 
employment in question at the place of employment and must pay the H-1B 
nonimmigrant at least the higher of the two wages.
    (b) Documentation of the wage statement. (1) The employer shall 
develop and maintain documentation sufficient to meet its burden of 
proving the validity of the wage statement required in paragraph (a) of 
this section and attested to on Form ETA 9035. The documentation shall 
be made available to DOL upon request. Documentation shall also be made 
available for public examination to the extent required by 
Sec. 655.760. The employer shall also document that the wage rate(s) 
paid to H-1B nonimmigrant(s) is(are) no less than the required wage 
rate(s). The documentation shall include information about the 
employer's wage rate(s) for all other employees for the specific 
employment in question at the place of employment, beginning with the 
date the labor condition application was submitted and continuing 
throughout the period of employment. The records shall be retained for 
the period of time specified in Sec. 655.760. The payroll records for 
each such employee shall include:
    (i) Employee's full name;
    (ii) Employee's home address;
    (iii) Employee's occupation;
    (iv) Employee's rate of pay;
    (v) Hours worked each day and each week by the employee if:
    (A) The employee is paid on other than a salary basis (e.g., 
hourly, piece-rate; commission); or
    (B) With respect only to H-1B nonimmigrants, the worker is a part-
time employee (whether paid a salary or an hourly rate).
    (vi) Total additions to or deductions from pay each pay period, by 
employee; and
    (vii) Total wages paid each pay period, date of pay and pay period 
covered by the payment, by employee.
    (viii) Documentation of offer of benefits and eligibility for 
benefits provided as compensation for services on the same basis, and 
in accordance with the same criteria, as the employer offers to U.S. 
workers (see paragraph (c)(3) of this section):
    (A) A copy of any document(s) provided to employees describing the 
benefits that are offered to employees, the eligibility and 
participation rules, how costs are shared, etc. (e.g., summary plan 
descriptions, employee handbooks, any special or employee-specific 
notices that might be sent);
    (B) A copy of all benefit plans or other documentation describing 
benefit plans and any rules the employer may have for differentiating 
benefits among groups of workers;
    (C) Evidence as to what benefits are actually provided to U.S. 
workers and H-1B nonimmigrants, including evidence of the benefits 
selected or declined by employees where employees are given a choice of 
benefits;
    (D) For multinational employers who choose to provide H-1B 
nonimmigrants with ``home country'' benefits, evidence of the benefits 
provided to the nonimmigrant before and after he/she went to the United 
States. See paragraph (c)(3)(iii)(C) of this section.
    (2) Actual wage. In addition to payroll data required by paragraph 
(b)(1) of this section (and also by the Fair Labor Standards Act), the 
employer shall retain documentation specifying the basis it used to 
establish the actual wage. The employer shall show how the wage set for 
the H-1B nonimmigrant relates to the wages paid by the employer to all 
other individuals with similar experience and qualifications for the 
specific employment in question at the place of employment. Where 
adjustments are made in the employer's pay system or scale during the 
validity period of the LCA, the employer shall retain documentation 
explaining the change and clearly showing that, after such adjustments, 
the wages paid to the H-1B nonimmigrant are at least the greater of the 
adjusted actual wage or the prevailing wage for the occupation and area 
of intended employment.
    (3) Prevailing wage. The employer also shall retain documentation 
regarding its determination of the prevailing wage. This source 
documentation shall not be submitted to ETA with the labor condition 
application, but shall be retained at the employer's place of business 
for the length of time required in Sec. 655.760(c). Such documentation 
shall consist of the documentation described in paragraph (b)(3)(i), 
(ii), or (iii) of this section and the documentation described in 
paragraph (b)(1) of this section.
    (i) If the employer used a wage determination issued pursuant to 
the provisions of the Davis-Bacon Act, 40 U.S.C. 276a et seq. (see 29 
CFR part 1), or the McNamara-O'Hara Service Contract Act, 41 U.S.C. 351 
et seq. (see 29 CFR part 4), the documentation shall include a copy of 
the determination showing the wage rate for the occupation in the area 
of intended employment.
    (ii) If the employer used an applicable wage rate from a union 
contract which was negotiated at arms-length between a union and the 
employer, the documentation shall include an excerpt from the union 
contract showing the wage rate(s) for the occupation.
    (iii) If the employer did not use a wage covered by the provisions 
of paragraph (b)(3)(i) or (b)(3)(ii) of this section, the employer's 
documentation shall consist of:
    (A) A copy of the prevailing wage finding from the SESA for the

[[Page 80217]]

occupation within the area of intended employment; or
    (B) A copy of the prevailing wage survey for the occupation within 
the area of intended employment published by an independent 
authoritative source. For purposes of this paragraph (b)(3)(iii)(B), a 
prevailing wage survey for the occupation in the area of intended 
employment published by an independent authoritative source shall mean 
a survey of wages published in a book, newspaper, periodical, loose-
leaf service, newsletter, or other similar medium, within the 24-month 
period immediately preceding the filing of the employer's application. 
Such survey shall:
    (1) Reflect the weighted average wage paid to workers similarly 
employed in the area of intended employment;
    (2) Be based upon recently collected data--e.g., within the 24-
month period immediately preceding the date of publication of the 
survey; and
    (3) Represent the latest published prevailing wage finding by the 
independent authoritative source for the occupation in the area of 
intended employment; or
    (C) A copy of the prevailing wage survey or other source data 
acquired from another legitimate source of wage information that was 
used to make the prevailing wage determination. For purposes of this 
paragraph (b)(3)(iii)(C), a prevailing wage provided by another 
legitimate source of such wage information shall be one which:
    (1) Reflects the weighted average wage paid to workers similarly 
employed in the area of intended employment;
    (2) Is based on the most recent and accurate information available; 
and
    (3) Is reasonable and consistent with recognized standards and 
principles in producing a prevailing wage.
    (c) Satisfaction of required wage obligation. (1) The required wage 
must be paid to the employee, cash in hand, free and clear, when due, 
except that deductions made in accordance with paragraph (c)(9) of this 
section may reduce the cash wage below the level of the required wage. 
Benefits and eligibility for benefits provided as compensation for 
services must be offered in accordance with paragraph (c)(3) of this 
section.
    (2) ``Cash wages paid,'' for purposes of satisfying the H-1B 
required wage, shall consist only of those payments that meet all the 
following criteria:
    (i) Payments shown in the employer's payroll records as earnings 
for the employee, and disbursed to the employee, cash in hand, free and 
clear, when due, except for deductions authorized by paragraph (c)(9) 
of this section;
    (ii) Payments reported to the Internal Revenue Service (IRS) as the 
employee's earnings, with appropriate withholding for the employee's 
tax paid to the IRS (in accordance with the Internal Revenue Code of 
1986, 26 U.S.C. 1, et seq.);
    (iii) Payments of the tax reported and paid to the IRS as required 
by the Federal Insurance Contributions Act, 26 U.S.C. 3101, et seq. 
(FICA). The employer must be able to document that the payments have 
been so reported to the IRS and that both the employer's and employee's 
taxes have been paid except that when the H-1B nonimmigrant is a 
citizen of a foreign country with which the President of the United 
States has entered into an agreement as authorized by section 233 of 
the Social Security Act, 42 U.S.C. 433 (i.e., an agreement establishing 
a totalization arrangement between the social security system of the 
United States and that of the foreign country), the employer's 
documentation shall show that all appropriate reports have been filed 
and taxes have been paid in the employee's home country.
    (iv) Payments reported, and so documented by the employer, as the 
employee's earnings, with appropriate employer and employee taxes paid 
to all other appropriate Federal, State, and local governments in 
accordance with any other applicable law.
    (v) Future bonuses and similar compensation (i.e., unpaid but to-
be-paid) may be credited toward satisfaction of the required wage 
obligation if their payment is assured (i.e., they are not conditional 
or contingent on some event such as the employer's annual profits). 
Once the bonuses or similar compensation are paid to the employee, they 
must meet the requirements of paragraphs (c)(2)(i) through (iv) of this 
section (i.e., recorded and reported as ``earnings'' with appropriate 
taxes and FICA contributions withheld and paid).
    (3) Benefits and eligibility for benefits provided as compensation 
for services (e.g., cash bonuses; stock options; paid vacations and 
holidays; health, life, disability and other insurance plans; 
retirement and savings plans) shall be offered to the H-1B 
nonimmigrant(s) on the same basis, and in accordance with the same 
criteria, as the employer offers to U.S. workers.
    (i) For purposes of this section, the offer of benefits ``on the 
same basis, and in accordance with the same criteria'' means that the 
employer shall offer H-1B nonimmigrants the same benefit package as it 
offers to U.S. workers, and may not provide more strict eligibility or 
participation requirements for the H-1B nonimmigrant(s) than for 
similarly employed U.S. workers(s) (e.g., full-time workers compared to 
full-time workers; professional staff compared to professional staff). 
H-1B nonimmigrants are not to be denied benefits on the basis that they 
are ``temporary employees'' by virtue of their nonimmigrant status. An 
employer may offer greater or additional benefits to the H-1B 
nonimmigrant(s) than are offered to similarly employed U.S. worker(s), 
provided that such differing treatment is consistent with the 
requirements of all applicable nondiscrimination laws (e.g., Title VII 
of the 1964 Civil Rights Act, 42 U.S.C. 2000e-2000e17). Offers of 
benefits by employers shall be made in good faith and shall result in 
the H-1B nonimmigrant(s)'s actual receipt of the benefits that are 
offered by the employer and elected by the H-1B nonimmigrant(s).
    (ii) The benefits received by the H-1B nonimmigrant(s) need not be 
identical to the benefits received by similarly employed U.S. 
workers(s), provided that the H-1B nonimmigrant is offered the same 
benefits package as those workers but voluntarily chooses to receive 
different benefits (e.g., elects to receive cash payment rather than 
stock option, elects not to receive health insurance because of 
required employee contributions, or elects to receive different 
benefits among an array of benefits) or, in those instances where the 
employer is part of a multinational corporate operation, the benefits 
received by the H-1B nonimmigrant are provided in accordance with an 
employer's practice that satisfies the requirements of paragraph 
(c)(3)(iii)(B) or (C) of this section. In all cases, however, an 
employer's practice must comply with the requirements of any applicable 
nondiscrimination laws (e.g., Title VII of the 1964 Civil Rights Act, 
42 U.S.C. 2000e-2000e17).
    (iii) If the employer is part of a multinational corporate 
operation (i.e., operates in affiliation with business entities in 
other countries, whether as subsidiaries or in some other arrangement), 
the following three options (i.e., (A), (B) or (C)) are available to 
the employer with respect to H-1B nonimmigrants who remain on the 
``home country'' payroll.
    (A) The employer may offer the H-1B nonimmigrant(s) benefits in 
accordance with paragraphs (c)(3)(i) and (ii) of this section.
    (B) Where an H-1B nonimmigrant is in the U.S. for no more than 90 
consecutive calendar days, the employer during that period may maintain 
the H-

[[Page 80218]]

1B nonimmigrant on the benefits provided to the nonimmigrant in his/her 
permanent work station (ordinarily the home country), and not offer the 
nonimmigrant the benefits that are offered to similarly employed U.S. 
workers, provided that the employer affords reciprocal benefits 
treatment for any U.S. workers (i.e., allows its U.S. employees, while 
working out of the country on a temporary basis away from their 
permanent work stations in the United States, or while working in the 
United States on a temporary basis away from their permanent work 
stations in another country, to continue to receive the benefits 
provided them at their permanent work stations). Employers are 
cautioned that this provision is available only if the employer's 
practices do not constitute an evasion of the benefit requirements, 
such as where the H-1B nonimmigrant remains in the United States for 
most of the year, but briefly returns to the ``home country'' before 
any 90-day period would expire.
    (C) Where an H-1B nonimmigrant is in the U.S. for more than 90 
consecutive calendar days (or from the point where the worker is 
transferred to the U.S. or it is anticipated that the worker will 
likely remain in the U.S. more than 90 consecutive days), the employer 
may maintain the H-1B nonimmigrant on the benefits provided in his/her 
home country (i.e., ``home country benefits'') (and not offer the 
nonimmigrant the benefits that are offered to similarly employed U.S. 
workers) provided that all of the following criteria are satisfied:
    (1) The H-1B nonimmigrant continues to be employed in his/her home 
country (either with the H-1B employer or with a corporate affiliate of 
the employer);
    (2) The H-1B nonimmigrant is enrolled in benefits in his/her home 
country (in accordance with any applicable eligibility standards for 
such benefits);
    (3) The benefits provided in his/her home country are equivalent 
to, or equitably comparable to, the benefits offered to similarly 
employed U.S. workers (i.e., are no less advantageous to the 
nonimmigrant);
    (4) The employer affords reciprocal benefits treatment for any U.S. 
workers while they are working out of the country, away from their 
permanent work stations (whether in the United States or abroad), on a 
temporary basis (i.e., maintains such U.S. workers on the benefits they 
received at their permanent work stations);
    (5) If the employer offers health benefits to its U.S. workers, the 
employer offers the same plan on the same basis to its H-1B 
nonimmigrants in the United States where the employer does not provide 
the H-1B nonimmigrant with health benefits in the home country, or the 
employer's home-country health plan does not provide full coverage 
(i.e., coverage comparable to what he/she would receive at the home 
work station) for medical treatment in the United States; and
    (6) the employer offers H-1B nonimmigrants who are in the United 
States more than 90 continuous days those U.S. benefits which are paid 
directly to the worker (e.g., paid vacation, paid holidays, and 
bonuses).
    (iv) Benefits provided as compensation for services may be credited 
toward the satisfaction of the employer's required wage obligation only 
if the requirements of paragraph (c)(2) of this section are met (e.g., 
recorded and reported as ``earnings'' with appropriate taxes and FICA 
contributions withheld and paid).
    (4) For salaried employees, wages will be due in prorated 
installments (e.g., annual salary divided into 26 bi-weekly pay 
periods, where employer pays bi-weekly) paid no less often than monthly 
except that, in the event that the employer intends to use some other 
form of nondiscretionary payment to supplement the employee's regular/
pro-rata pay in order to meet the required wage obligation (e.g., a 
quarterly production bonus), the employer's documentation of wage 
payments (including such supplemental payments) must show the 
employer's commitment to make such payment and the method of 
determining the amount thereof, and must show unequivocally that the 
required wage obligation was met for prior pay periods and, upon 
payment and distribution of such other payments that are pending, will 
be met for each current or future pay period. An employer that is a 
school or other educational institution may apply an established salary 
practice under which the employer pays to H-1B nonimmigrants and U.S. 
workers in the same occupational classification an annual salary in 
disbursements over fewer than 12 months, provided that the nonimmigrant 
agrees to the compressed annual salary payments prior to the 
commencement of the employment and the application of the salary 
practice to the nonimmigrant does not otherwise cause him/her to 
violate any condition of his/her authorization under the INA to remain 
in the U.S.
    (5) For hourly-wage employees, the required wages will be due for 
all hours worked and/or for any nonproductive time (as specified in 
paragraph (c)(7) of this section) at the end of the employee's ordinary 
pay period (e.g., weekly) but in no event less frequently than monthly.
    (6) Subject to the standards specified in paragraph (c)(7) of this 
section (regarding nonproductive status), an H-1B nonimmigrant shall 
receive the required pay beginning on the date when the nonimmigrant 
``enters into employment'' with the employer.
    (i) For purposes of this paragraph (c)(6), the H-1B nonimmigrant is 
considered to ``enter into employment'' when he/she first makes him/
herself available for work or otherwise comes under the control of the 
employer, such as by waiting for an assignment, reporting for 
orientation or training, going to an interview or meeting with a 
customer, or studying for a licensing examination, and includes all 
activities thereafter.
    (ii) Even if the H-1B nonimmigrant has not yet ``entered into 
employment'' with the employer (as described in paragraph (c)(6)(i) of 
this section), the employer that has had an LCA certified and an H-1B 
petition approved for the H-1B nonimmigrant shall pay the nonimmigrant 
the required wage beginning 30 days after the date the nonimmigrant 
first is admitted into the U.S. pursuant to the petition, or, if the 
nonimmigrant is present in the United States on the date of the 
approval of the petition, beginning 60 days after the date the 
nonimmigrant becomes eligible to work for the employer. For purposes of 
this latter requirement, the H-1B nonimmigrant is considered to be 
eligible to work for the employer upon the date of need set forth on 
the approved H-1B petition filed by the employer, or the date of 
adjustment of the nonimmigrant's status by INS, whichever is later. 
Matters such as the worker's obtaining a State license would not be 
relevant to this determination.
    (7) Wage obligation(s) for H-1B nonimmigrant in nonproductive 
status.
    (i) Circumstances where wages must be paid. If the H-1B 
nonimmigrant is not performing work and is in a nonproductive status 
due to a decision by the employer (e.g., because of lack of assigned 
work), lack of a permit or license, or any other reason except as 
specified in paragraph (c)(7)(ii) of this section, the employer is 
required to pay the salaried employee the full pro-rata amount due, or 
to pay the hourly-wage employee for a full-time week (40 hours or such 
other number of hours as the employer can demonstrate to be full-time 
employment for hourly employees, or the full amount of the weekly 
salary for salaried employees) at the required wage for the occupation 
listed on the LCA. If the employer's LCA carries a

[[Page 80219]]

designation of ``part-time employment,'' the employer is required to 
pay the nonproductive employee for at least the number of hours 
indicated on the I-129 petition filed by the employer with the INS and 
incorporated by reference on the LCA. If the I-129 indicates a range of 
hours for part-time employment, the employer is required to pay the 
nonproductive employee for at least the average number of hours 
normally worked by the H-1B nonimmigrant, provided that such average is 
within the range indicated; in no event shall the employee be paid for 
fewer than the minimum number of hours indicated for the range of part-
time employment. In all cases the H-1B nonimmigrant must be paid the 
required wage for all hours performing work within the meaning of the 
Fair Labor Standards Act, 29 U.S.C. 201 et seq.
    (ii) Circumstances where wages need not be paid. If an H-1B 
nonimmigrant experiences a period of nonproductive status due to 
conditions unrelated to employment which take the nonimmigrant away 
from his/her duties at his/her voluntary request and convenience (e.g., 
touring the U.S., caring for ill relative) or render the nonimmigrant 
unable to work (e.g., maternity leave, automobile accident which 
temporarily incapacitates the nonimmigrant), then the employer shall 
not be obligated to pay the required wage rate during that period, 
provided that such period is not subject to payment under the 
employer's benefit plan or other statutes such as the Family and 
Medical Leave Act (29 U.S.C. 2601 et seq.) or the Americans with 
Disabilities Act (42 U.S.C. 12101 et seq.). Payment need not be made if 
there has been a bona fide termination of the employment relationship. 
INS regulations require the employer to notify the INS that the 
employment relationship has been terminated so that the petition is 
canceled (8 CFR 214.2(h)(11)), and require the employer to provide the 
employee with payment for transportation home under certain 
circumstances (8 CFR 214.2(h)(4)(iii)(E)).
    (8) If the employee works in an occupation other than that 
identified on the employer's LCA, the employer's required wage 
obligation is based on the occupation identified on the LCA, and not on 
whatever wage standards may be applicable in the occupation in which 
the employee may be working.
    (9) ``Authorized deductions,'' for purposes of the employer's 
satisfaction of the H-1B required wage obligation, means a deduction 
from wages in complete compliance with one of the following three sets 
of criteria (i.e., paragraph (c)(9)(i), (ii), or (iii))--
    (i) Deduction which is required by law (e.g., income tax; FICA); or
    (ii) Deduction which is authorized by a collective bargaining 
agreement, or is reasonable and customary in the occupation and/or area 
of employment (e.g., union dues; contribution to premium for health 
insurance policy covering all employees; savings or retirement fund 
contribution for plan(s) in compliance with the Employee Retirement 
Income Security Act, 29 U.S.C. 1001, et seq.), except that the 
deduction may not recoup a business expense(s) of the employer 
(including attorney fees and other costs connected to the performance 
of H-1B program functions which are required to be performed by the 
employer, e.g., preparation and filing of LCA and H-1B petition); the 
deduction must have been revealed to the worker prior to the 
commencement of employment and, if the deduction was a condition of 
employment, had been clearly identified as such; and the deduction must 
be made against wages of U.S. workers as well as H-1B nonimmigrants 
(where there are U.S. workers); or
    (iii) Deduction which meets the following requirements:
    (A) Is made in accordance with a voluntary, written authorization 
by the employee (Note to paragraph (c)(9)(iii)(A): an employee's mere 
acceptance of a job which carries a deduction as a condition of 
employment does not constitute voluntary authorization, even if such 
condition were stated in writing);
    (B) Is for a matter principally for the benefit of the employee 
(Note to paragraph (c)(9)(iii)(B): housing and food allowances would be 
considered to meet this ``benefit of employee'' standard, unless the 
employee is in travel status, or unless the circumstances indicate that 
the arrangements for the employee's housing or food are principally for 
the convenience or benefit of the employer (e.g., employee living at 
worksite in ``on call'' status));
    (C) Is not a recoupment of the employer's business expense (e.g., 
tools and equipment; transportation costs where such transportation is 
an incident of, and necessary to, the employment; living expenses when 
the employee is traveling on the employer's business; attorney fees and 
other costs connected to the performance of H-1B program functions 
which are required to be performed by the employer (e.g., preparation 
and filing of LCA and H-1B petition)). (For purposes of this section, 
initial transportation from, and end-of-employment travel, to the 
worker's home country shall not be considered a business expense.);
    (D) Is an amount that does not exceed the fair market value or the 
actual cost (whichever is lower) of the matter covered (Note to 
paragraph (c)(9)(iii)(D): The employer must document the cost and 
value); and
    (E) Is an amount that does not exceed the limits set for 
garnishment of wages in the Consumer Credit Protection Act, 15 U.S.C. 
1673, and the regulations of the Secretary pursuant to that Act, 29 CFR 
part 870, under which garnishment(s) may not exceed 25 percent of an 
employee's disposable earnings for a workweek.
    (10) A deduction from or reduction in the payment of the required 
wage is not authorized (and is therefore prohibited) for the following 
purposes (i.e., paragraphs (c)(10) (i) and (ii)):
    (i) A penalty paid by the H-1B nonimmigrant for ceasing employment 
with the employer prior to a date agreed to by the nonimmigrant and the 
employer.
    (A) The employer is not permitted to require (directly or 
indirectly) that the nonimmigrant pay a penalty for ceasing employment 
with the employer prior to an agreed date. Therefore, the employer 
shall not make any deduction from or reduction in the payment of the 
required wage to collect such a penalty.
    (B) The employer is permitted to receive bona fide liquidated 
damages from the H-1B nonimmigrant who ceases employment with the 
employer prior to an agreed date. However, the requirements of 
paragraph (c)(9)(iii) of this section must be fully satisfied, if such 
damages are to be received by the employer via deduction from or 
reduction in the payment of the required wage.
    (C) The distinction between liquidated damages (which are 
permissible) and a penalty (which is prohibited) is to be made on the 
basis of the applicable State law. In general, the laws of the various 
States recognize that liquidated damages are amounts which are fixed or 
stipulated by the parties at the inception of the contract, and which 
are reasonable approximations or estimates of the anticipated or actual 
damage caused to one party by the other party's breach of the contract. 
On the other hand, the laws of the various States, in general, consider 
that penalties are amounts which (although fixed or stipulated in the 
contract by the parties) are not reasonable approximations or estimates 
of such damage. The laws of the various States, in general, require 
that the relation or circumstances of the parties,

[[Page 80220]]

and the purpose(s) of the agreement, are to be taken into account, so 
that, for example, an agreement to a payment would be considered to be 
a prohibited penalty where it is the result of fraud or where it cloaks 
oppression. Furthermore, as a general matter, the sum stipulated must 
take into account whether the contract breach is total or partial 
(i.e., the percentage of the employment contract completed). (See, 
e.g., Vanderbilt University v. DiNardo, 174 F.3d 751 (6th Cir. 1999) 
(applying Tennessee law); Overholt Crop Insurance Service Co. v. 
Travis,  941 F.2d 1361 (8th Cir. 1991) (applying Minnesota and South 
Dakota law); BDO Seidman v. Hirshberg, 712 N.E.2d 1220 (N.Y. 1999); 
Guiliano v. Cleo, Inc., 995 S.W.2d 88 (Tenn. 1999); Wojtowicz v. 
Greeley Anesthesia Services, P.C., 961 P.2d 520 (Colo.Ct.App. 1998); 
see generally, Restatement (Second) Contracts Sec. 356 (comment b); 22 
Am.Jur.2d Damages Secs. 683, 686, 690, 693, 703). In an enforcement 
proceeding under subpart I of this part, the Administrator shall 
determine, applying relevant State law (including consideration where 
appropriate to actions by the employer, if any, contributing to the 
early cessation, such as the employer's constructive discharge of the 
nonimmigrant or non-compliance with its obligations under the INA and 
its regulations) whether the payment in question constitutes liquidated 
damages or a penalty. (Note to paragraph (c)(10)(i)(C): The $500/$1,000 
filing fee under section 214(c)(1) of the INA can never be included in 
any liquidated damages received by the employer. See paragraph 
(c)(10)(ii), which follows.)
    (ii) A rebate of the $500/$1,000 filing fee paid by the employer 
under Section 214(c)(1) of the INA. The employer may not receive, and 
the H-1B nonimmigrant may not pay, any part of the $500 additional 
filing fee (for a petition filed prior to December 18, 2000) or $1,000 
additional filing fee (for a petition filed on or subsequent to 
December 18, 2000), whether directly or indirectly, voluntarily or 
involuntarily. Thus, no deduction from or reduction in wages for 
purposes of a rebate of any part of this fee is permitted. Further, if 
liquidated damages are received by the employer from the H-1B 
nonimmigrant upon the nonimmigrant's ceasing employment with the 
employer prior to a date agreed to by the nonimmigrant and the 
employer, such liquidated damages shall not include any part of the 
$500/$1,000 filing fee (see paragraph (c)(10)(i) of this section). If 
the filing fee is paid by a third party and the H-1B nonimmigrant 
reimburses all or part of the fee to such third party, the employer 
shall be considered to be in violation of this prohibition since the 
employer would in such circumstances have been spared the expense of 
the fee which the H-1B nonimmigrant paid.
    (11) Any unauthorized deduction taken from wages is considered by 
the Department to be non-payment of that amount of wages, and in the 
event of an investigation, will result in back wage assessment (plus 
civil money penalties and/or disqualification from H-1B and other 
immigration programs, if willful).
    (12) Where the employer depresses the employee's wages below the 
required wage by imposing on the employee any of the employer's 
business expenses(s), the Department will consider the amount to be an 
unauthorized deduction from wages even if the matter is not shown in 
the employer's payroll records as a deduction.
    (13) Where the employer makes deduction(s) for repayment of loan(s) 
or wage advance(s) made to the employee, the Department, in the event 
of an investigation, will require the employer to establish the 
legitimacy and purpose(s) of the loan(s) or wage advance(s), with 
reference to the standards set out in paragraph (c)(9)(iii) of this 
section.
    (d) Enforcement actions. (1) In the event of an investigation 
pursuant to subpart I of this part, concerning a failure to meet the 
``prevailing wage'' condition or a material misrepresentation by the 
employer regarding the payment of the required wage, the Administrator 
shall determine whether the employer has the documentation required in 
paragraph (b)(3) of this section, and whether the documentation 
supports the employer's wage attestation. Where the documentation is 
either nonexistent or insufficient to determine the prevailing wage 
(e.g., does not meet the criteria specified in this section, in which 
case the Administrator may find a violation of paragraph (b)(1), (2), 
or (3), of this section); or where, based on significant evidence 
regarding wages paid for the occupation in the area of intended 
employment, the Administrator has reason to believe that the prevailing 
wage finding obtained from an independent authoritative source or 
another legitimate source varies substantially from the wage prevailing 
for the occupation in the area of intended employment; or where the 
employer has been unable to demonstrate that the prevailing wage 
determined by another legitimate source is in accordance with the 
regulatory criteria, the Administrator may contact ETA, which shall 
provide the Administrator with a prevailing wage determination, which 
the Administrator shall use as the basis for determining violations and 
for computing back wages, if such wages are found to be owed. The 30-
day investigatory period shall be suspended while ETA makes the 
prevailing wage determination and, in the event that the employer 
timely challenges the determination through the Employment Service 
complaint system (see paragraph (d)(2), which follows), shall be 
suspended until the Employment Service complaint system process is 
completed and the Administrator's investigation can be resumed.
    (2) In the event the Administrator obtains a prevailing wage from 
ETA pursuant to paragraph (d)(1) of this section, the employer may 
challenge the ETA prevailing wage only through the Employment Service 
complaint system. (See 20 CFR part 658, subpart E.) Notwithstanding the 
provisions of 20 CFR 658.421 and 658.426, the appeal shall be initiated 
at the ETA regional office which services the State in which the place 
of employment is located (see Sec. 655.721 for the ETA regional offices 
and their jurisdictions). Such challenge shall be initiated within 10 
days after the employer receives ETA's prevailing wage determination 
from the Administrator. In any challenge to the wage determination, 
neither ETA nor the SESA shall divulge any employer wage data which was 
collected under the promise of confidentiality.
    (i) Where the employer timely challenges an ETA prevailing wage 
determination obtained by the Administrator, the 30-day investigative 
period shall be suspended until the employer obtains a final ruling 
from the Employment Service complaint system. Upon such final ruling, 
the investigation and any subsequent enforcement proceeding shall 
continue, with ETA's prevailing wage determination serving as the 
conclusive determination for all purposes.
    (ii) Where the employer does not challenge ETA's prevailing wage 
determination obtained by the Administrator, such determination shall 
be deemed to have been accepted by the employer as accurate and 
appropriate (as to the amount of the wage) and thereafter shall not be 
subject to challenge in a hearing pursuant to Sec. 655.835.
    (3) For purposes of this paragraph (d), ETA may consult with the 
appropriate SESA to ascertain the prevailing wage applicable under the 
circumstances of the particular complaint.

[[Page 80221]]

    (4) No prevailing wage violation will be found if the employer paid 
a wage that is equal to, or more than 95 percent of, the prevailing 
wage as required by paragraph (a)(2)(iii) of this section. If the 
employer paid a wage that is less than 95 percent of the prevailing 
wage, the employer will be required to pay 100 percent of the 
prevailing wage.

    11. Section 655.732 is revised to read as follows:


Sec. 655.732  What is the second LCA requirement, regarding working 
conditions?

    An employer seeking to employ H-1B nonimmigrants in specialty 
occupations or as fashion models of distinguished merit and ability 
shall state on Form ETA 9035 that the employment of H-1B nonimmigrants 
will not adversely affect the working conditions of workers similarly 
employed in the area of intended employment.
    (a) Establishing the working conditions requirement. The second LCA 
requirement shall be satisfied when the employer affords working 
conditions to its H-1B nonimmigrant employees on the same basis and in 
accordance with the same criteria as it affords to its U.S. worker 
employees who are similarly employed, and without adverse effect upon 
the working conditions of such U.S. worker employees. Working 
conditions include matters such as hours, shifts, vacation periods, and 
benefits such as seniority-based preferences for training programs and 
work schedules. The employer's obligation regarding working conditions 
shall extend for the longer of two periods: the validity period of the 
certified LCA, or the period during which the H-1B nonimmigrant(s) 
is(are) employed by the employer.
    (b) Documentation of the working condition statement. In the event 
of an enforcement action pursuant to subpart I of this part, the 
employer shall produce documentation to show that it has afforded its 
H-1B nonimmigrant employees working conditions on the same basis and in 
accordance with the same criteria as it affords its U.S. worker 
employees who are similarly employed.

    12. The title to Sec. 655.733 is revised to read as follows:


Sec. 655.733  What is the third LCA requirement, regarding strikes and 
lockouts?

    13. Section 655.734 is amended by revising the title and by 
revising paragraphs (a) (l) (ii) and (a) (2) and by adding paragraph 
(a)(3), to read as follows:


Sec. 655.734  What is the fourth LCA requirement, regarding notice?

* * * * *
    (a) * * *
    (1) * * *
    (i) * * *
    (ii) Where there is no collective bargaining representative, the 
employer shall, on or within 30 days before the date the LCA is filed 
with ETA, provide a notice of the filing of the LCA. The notice shall 
indicate that H-1B nonimmigrants are sought; the number of such 
nonimmigrants the employer is seeking; the occupational classification; 
the wages offered; the period of employment; the location(s) at which 
the H-1B nonimmigrants will be employed; and that the LCA is available 
for public inspection at the H-1B employer's principal place of 
business in the U.S. or at the worksite. The notice shall also include 
the statement: ``Complaints alleging misrepresentation of material 
facts in the labor condition application and/or failure to comply with 
the terms of the labor condition application may be filed with any 
office of the Wage and Hour Division of the United States Department of 
Labor.'' If the employer is an H-1B-dependent employer or a willful 
violator, and the LCA is not being used only for exempt H-1B 
nonimmigrants, the notice shall also set forth the nondisplacement and 
recruitment obligations to which the employer has attested, and shall 
include the following additional statement: ``Complaints alleging 
failure to offer employment to an equally or better qualified U.S. 
worker, or an employer's misrepresentation regarding such offer(s) of 
employment, may be filed with the Department of Justice, 10th Street & 
Constitution Avenue, NW., Washington, DC 20530.'' The notice shall be 
provided in one of the two following manners:
    (A) Hard copy notice, by posting a notice in at least two 
conspicuous locations at each place of employment where any H-1B 
nonimmigrant will be employed (whether such place of employment is 
owned or operated by the employer or by some other person or entity).
    (1) The notice shall be of sufficient size and visibility, and 
shall be posted in two or more conspicuous places so that workers in 
the occupational classification at the place(s) of employment can 
easily see and read the posted notice(s).
    (2) Appropriate locations for posting the notices include, but are 
not limited to, locations in the immediate proximity of wage and hour 
notices required by 29 CFR 516.4 or occupational safety and health 
notices required by 29 CFR 1903.2(a).
    (3) The notices shall be posted on or within 30 days before the 
date the labor condition application is filed and shall remain posted 
for a total of 10 days.
    (B) Electronic notice, by providing electronic notification to 
employees in the occupational classification (including both employees 
of the H-1B employer and employees of another person or entity which 
owns or operates the place of employment) for which H-1B nonimmigrants 
are sought, at each place of employment where any H-1B nonimmigrant 
will be employed. Such notification shall be given on or within 30 days 
before the date the labor condition application is filed, and shall be 
available to the affected employees for a total of 10 days, except that 
if employees are provided individual, direct notice (as by e-mail), 
notification only need be given once during the required time period. 
Notification shall be readily available to the affected employees. An 
employer may accomplish this by any means it ordinarily uses to 
communicate with its workers about job vacancies or promotion 
opportunities, including through its ``home page'' or ``electronic 
bulletin board'' to employees who have, as a practical matter, direct 
access to these resources; or through e-mail or an actively circulated 
electronic message such as the employer's newsletter. Where affected 
employees at the place of employment are not on the ``intranet'' which 
provides direct access to the home page or other electronic site but do 
have computer access readily available, the employer may provide notice 
to such workers by direct electronic communication such as e-mail 
(i.e., a single, personal e-mail message to each such employee) or by 
arranging to have the notice appear for 10 days on an intranet which 
includes the affected employees (e.g., contractor arranges to have 
notice on customer's intranet accessible to affected employees). Where 
employees lack practical computer access, a hard copy must be posted in 
accordance with paragraph (a)(1)(ii)(A) of this section, or the 
employer may provide employees individual copies of the notice.
    (2) Where the employer places any H-1B nonimmigrant(s) at one or 
more worksites not contemplated at the time of filing the application, 
but which are within the area of intended employment listed on the LCA, 
the employer is required to post electronic or hard-copy notice(s) at 
such worksite(s), in the manner described in paragraph (a)(1) of this 
section, on or before the date any H-1B nonimmigrant begins work.

[[Page 80222]]

    (3) The employer shall, no later than the date the H-1B 
nonimmigrant reports to work at the place of employment, provide the H-
1B nonimmigrant with a copy of the LCA (Form ETA 9035) certified by the 
Department. Upon request, the employer shall provide the H-1B 
nonimmigrant with a copy of the cover pages, Form ETA 9035CP.
* * * * *

    14. Section 655.735 is revised to read as follows:


Sec. 655.735  What are the special provisions for short-term placement 
of H-1B nonimmigrants at place(s) of employment outside the area(s) of 
intended employment listed on the LCA?

    (a) Subject to the conditions specified in this section, an 
employer may make short-term placements or assignments of H-1B 
nonimmigrant(s) at worksite(s) (place(s) of employment) in areas not 
listed on the employer's approved LCA(s) without filing new labor 
condition application(s) for such area(s).
    (b) The following conditions must be fully satisfied by an employer 
during all short-term placement(s) or assignment(s) of H-1B 
nonimmigrant(s) at worksite(s) (place(s) of employment) in areas not 
listed on the employer's approved LCA(s):
    (1) The employer has fully satisfied the requirements of 
Secs. 655.730 through 655.734 with regard to worksite(s) located within 
the area(s) of intended employment listed on the employer's LCA(s).
    (2) The employer shall not place, assign, lease, or otherwise 
contract out any H-1B nonimmigrant(s) to any worksite where there is a 
strike or lockout in the course of a labor dispute in the same 
occupational classification(s) as that of the H-1B nonimmigrant(s).
    (3) For every day the H-1B nonimmigrant(s) is placed or assigned 
outside the area(s) of employment listed on the approved LCA(s) for 
such worker(s), the employer shall:
    (i) Continue to pay such worker(s) the required wage (based on the 
prevailing wage at such worker's(s') permanent worksite, or the 
employer's actual wage, whichever is higher);
    (ii) Pay such worker(s) the actual cost of lodging (for both 
workdays and non-workdays); and
    (iii) Pay such worker(s) the actual cost of travel, meals and 
incidental or miscellaneous expenses (for both workdays and non-
workdays).
    (c) An employer's short-term placement(s) or assignment(s) of H-1B 
nonimmigrant(s) at any worksite(s) in an area of employment not listed 
on the employer's approved LCA(s) shall not exceed a total of 30 
workdays in a one-year period for any H-1B nonimmigrant at any worksite 
or combination of worksites in the area, except that such placement or 
assignment of an H-1B nonimmigrant may be for longer than 30 workdays 
but for no more than a total of 60 workdays in a one-year period where 
the employer is able to show the following:
    (1) The H-1B nonimmigrant continues to maintain an office or work 
station at his/her permanent worksite (e.g., the worker has a dedicated 
workstation and telephone line(s) at the permanent worksite);
    (2) The H-1B nonimmigrant spends a substantial amount of time at 
the permanent worksite in a one-year period; and
    (3) The H-1B nonimmigrant's U.S. residence or place of abode is 
located in the area of the permanent worksite and not in the area of 
the short-term worksite(s) (e.g., the worker's personal mailing 
address; the worker's lease for an apartment or other home; the 
worker's bank accounts; the worker's automobile driver's license; the 
residence of the worker's dependents).
    (d) For purposes of this section, the term workday shall mean any 
day on which an H-1B nonimmigrant performs any work at any worksite(s) 
within the area of short-term placement or assignment. For example, 
three workdays would be counted where a nonimmigrant works three non-
consecutive days at three different worksites (whether or not the 
employer owns or controls such worksite(s)), within the same area of 
employment. Further, for purposes of this section, the term one-year 
period shall mean the calendar year (i.e., January 1 through December 
31) or the employer's fiscal year, whichever the employer chooses.
    (e) The employer may not make short-term placement(s) or 
assignment(s) of H-1B nonimmigrant(s) under this section at worksite(s) 
in any area of employment for which the employer has a certified LCA 
for the occupational classification. Further, an H-1B nonimmigrant 
entering the U.S. is required to be placed at a worksite in accordance 
with the approved petition and supporting LCA; thus, the nonimmigrant's 
initial placement or assignment cannot be a short-term placement under 
this section. In addition, the employer may not continuously rotate H-
1B nonimmigrants on short-term placement or assignment to an area of 
employment in a manner that would defeat the purpose of the short-term 
placement option, which is to provide the employer with flexibility in 
assignments to afford enough time to obtain an approved LCA for an area 
where it intends to have a continuing presence (e.g., an employer may 
not rotate H-1B nonimmigrants to an area of employment for 20-day 
periods, with the result that nonimmigrants are continuously or 
virtually continuously employed in the area of employment, in order to 
avoid filing an LCA; such an employer would violate the short-term 
placement provisions).
    (f) Once any H-1B nonimmigrant's short-term placement or assignment 
has reached the workday limit specified in paragraph (c) of this 
section in an area of employment, the employer shall take one of the 
following actions:
    (1) File an LCA and obtain ETA certification, and thereafter place 
any H-1B nonimmigrant(s) in that occupational classification at 
worksite(s) in that area pursuant to the LCA (i.e., the employer shall 
perform all actions required in connection with such LCA, including 
determination of the prevailing wage and notice to workers); or
    (2) Immediately terminate the placement of any H-1B nonimmigrant(s) 
who reaches the workday limit in an area of employment. No worker may 
exceed the workday limit within the one-year period specified in 
paragraph (d) of this section, unless the employer first files an LCA 
for the occupational classification for the area of employment. 
Employers are cautioned that if any worker exceeds the workday limit 
within the one-year period, then the employer has violated the terms of 
its LCA(s) and the regulations in the subpart, and thereafter the 
short-term placement option cannot be used by the employer for H-1B 
nonimmigrants in that occupational classification in that area of 
employment.
    (g) An employer is not required to use the short-term placement 
option provided by this section, but may choose to make each placement 
or assignment of an H-1B nonimmigrant at worksite(s) in a new area of 
employment pursuant to a new LCA for such area. Further, an employer 
which uses the short-term placement option is not required to continue 
to use the option. Such an employer may, at any time during the period 
identified in paragraphs (c) and (d) of this section, file an LCA for 
the new area of employment (performing all actions required in 
connection with such LCA); upon certification of such LCA, the 
employer's obligation to comply with this section concerning short-term 
placement shall terminate. (However, see Sec. 655.731(c)(9)(iii)(C) 
regarding payment of business expenses for

[[Page 80223]]

employee's travel on employer's business.)

    15. Section 655.736 is added to read as follows:


Sec. 655.736  What are H-1B-dependent employers and willful violators?

    Two attestation obligations apply only to two types of employers: 
H-1B-dependent employers (as described in paragraphs (a) through (e) of 
this section) and employers found to have willfully violated their H-1B 
obligations within a certain five-year period (as described in 
paragraph (f) of this section). These obligations apply only to certain 
labor condition applications filed by such employers (as described in 
paragraph (g) of this section), and do not apply to LCAs filed by such 
employers solely for the employment of ``exempt'' H-1B nonimmigrants 
(as described in paragraph (g) of this section and Sec. 655.737). These 
obligations require that such employers not displace U.S. workers from 
jobs (as described in Sec. 655.738) and that such employers recruit 
U.S. workers before hiring H-1B nonimmigrants (as described in 
Sec. 655.739).
    (a) What constitutes an ``H-1B-dependent'' employer?
    (1) ``H-1B-dependent employer,'' for purposes of THIS subpart H and 
subpart I of this part, means an employer that meets one of the three 
following standards, which are based on the ratio between the 
employer's total work force employed in the U.S. (including both U.S. 
workers and H-1B nonimmigrants, and measured according to full-time 
equivalent employees) and the employer's H-1B nonimmigrant employees (a 
``head count'' including both full-time and part-time H-1B employees) 
--
    (i)(A) The employer has 25 or fewer full-time equivalent employees 
who are employed in the U.S.; and
    (B) Employs more than seven H-1B nonimmigrants;
    (ii)(A) The employer has at least 26 but not more than 50 full-time 
equivalent employees who are employed in the U.S.; and
    (B) Employs more than 12 H-1B nonimmigrant; or
    (iii)(A) The employer has at least 51 full-time equivalent 
employees who are employed in the U.S.; and
    (B) Employs H-1B nonimmigrants in a number that is equal to at 
least 15 percent of the number of such full-time equivalent employees.
    (2) ``Full-time equivalent employees'' (FTEs), for purposes of 
paragraph (a) of this section are to be determined according to the 
following standards:
    (i) The determination of FTEs is to include only persons employed 
by the employer (as defined in Sec. 655.715), and does not include bona 
fide consultants and independent contractors. For purposes of this 
section, the Department will accept the employer's designation of 
persons as ``employees,'' provided that such persons are consistently 
treated as ``employees'' for all purposes including FICA, FLSA, etc.
    (ii) The determination of FTEs is to be based on the following 
records:
    (A) To determine the number of employees, the employer's quarterly 
tax statement (or similar document) is to be used (assuming there is no 
issue as to whether all employees are listed on the tax statement); and
    (B) To determine the number of hours of work by part-time 
employees, for purposes of aggregating such employees to FTEs, the last 
payroll (or the payrolls over the previous quarter, if the last payroll 
is not representative) is to be used, or where hours of work records 
are not maintained, other available information is to be used to make a 
reasonable approximation of hours of work (such as a standard work 
schedule). (But see paragraph (a)(2)(iii)(B)(1) of this section 
regarding the determination of FTEs for part-time employees without a 
computation of the hours worked by such employees.)
    (iii) The FTEs employed by the employer means the total of the two 
numbers yielded by paragraphs (a)(2)(iii)(A) and (B), which follow:
    (A) The number of full-time employees. A full-time employee is one 
who works 40 or more hours per week, unless the employer can show that 
less than 40 hours per week is full-time employment in its regular 
course of business (however, in no event would less than 35 hours per 
week be considered to be full-time employment). Each full-time employee 
equals one FTE (e.g., 50 full-time employees would yield 50 FTEs). 
(Note to paragraph (a)(2)(iii)(A): An employee who commonly works more 
than the number of hours constituting full-time employment cannot be 
counted as more than one FTE.); plus
    (B) The part-time employees aggregated to a number of full-time 
equivalents, if the employer has part-time employees. For purposes of 
this determination, a part-time employee is one who regularly works 
fewer than the number of hours per week which constitutes full-time 
employment (e.g., employee regularly works 20 hours, where full-time 
employment is 35 hours per week). The aggregation of part-time 
employees to FTEs may be performed by either of the following methods 
(i.e., paragraphs (a)(2)(iii)(B)(1) or (2)):
    (1) Each employee working fewer than full-time hours counted as 
one-half of an FTE, with the total rounded to the next higher whole 
number (e.g., three employees working fewer than 35 hours per week, 
where full-time employment is 35 hours, would yield two FTEs (i.e., 1.5 
rounded to 2)); or
    (2) The total number of hours worked by all part-time employees in 
the representative pay period, divided by the number of hours per week 
that constitute full-time employment, with the quotient rounded to the 
nearest whole number (e.g., 72 total hours of work by three part-time 
employees, divided by 40 (hours per week constituting full-time 
employment), would yield two FTEs (i.e., 1.8 rounded to 2)).
    (iv) Examples of determinations of FTEs: Employer A has 100 
employees, 70 of whom are full-time (with full-time employment shown to 
be 44 hours of work per week) and 30 of whom are part-time (with a 
total of 1004 hours of work by all 30 part-time employees during the 
representative pay period). Utilizing the method in paragraph 
(a)(2)(iii)(B)(1) of this section, this employer would have 85 FTEs: 70 
FTEs for full-time employees, plus 15 FTEs for part-time employees 
(i.e., each of the 30 part-time employees counted as one-half of a 
full-time employee, as described in paragraph (a)(2)(iii)(B)(1) of this 
section). (This employer would have 23 FTEs for part-time employees, if 
these FTEs were computed as described in paragraph (a)(2)(iii)(B)(2) of 
this section: 1004 total hours of work by part-time employees, divided 
by 44 (full-time employment), yielding 22.8, rounded to 23)). Employer 
B has 100 employees, 80 of whom are full-time (with full-time 
employment shown to be 40 hours of work per week) and 20 of whom are 
part-time (with a total of 630 hours of work by all 30 part-time 
employees during the representative pay period). This employer would 
have 90 FTEs: 80 FTEs for full-time employees, plus 10 FTEs for part-
time employees (i.e., each of the 20 part-time employees counted as 
one-half of a full-time employee, as described in paragraph 
(a)(2)(iii)(B)(1) of this section) (This employer would have 16 FTEs 
for part-time employees, if these FTEs were computed as described in 
paragraph (a)(2)(iii)(B)(2) of this section: 630 total hours of work by 
part-time employees, divided by 40 (full-time employment), yielding 
15.7, rounded to 16)).
    (b) What constitutes an ``employer'' for purposes of determining H-
1B-dependency status? Any group treated

[[Page 80224]]

as a single employer under the Internal Revenue Code (IRC) at 26 U.S.C. 
414(b), (c), (m) or (o) shall be treated as a single employer for 
purposes of the determination of H-1B-dependency. Therefore, if an 
employer satisfies the requirements of the IRC and relevant regulations 
with respect to the following groups of employees, those employees will 
be treated as employees of a single employer for purposes of 
determining whether that employer is an H-1B-dependent employer.
    (1) Pursuant to section 414(b) of the IRC and related regulations, 
all employees ``within a controlled group of corporations'' (within the 
meaning of section 1563(a) of the IRC, determined without regard to 
section 1563(a)(4) and (e)(3)(C)), will be treated as employees of a 
single employer. A controlled group of corporations is a parent-
subsidiary-controlled group, a brother-sister-controlled group, or a 
combined group. 26 U.S.C. 1563(a), 26 CFR 1.414(b)-1(a).
    (i) A parent-subsidiary-controlled group is one or more chains of 
corporations connected through stock ownership with a common parent 
corporation where at least 80 percent of the stock (by voting rights or 
value) of each subsidiary corporation is owned by one or more of the 
other corporations (either another subsidiary or the parent 
corporation), and the common parent corporation owns at least 80 
percent of the stock of at least one subsidiary.
    (ii) A brother-sister-controlled group is a group of corporations 
in which five or fewer persons (individuals, estates, or trusts) own 80 
percent or more of the stock of the corporations and certain other 
ownership criteria are satisfied.
    (iii) A combined group is a group of three or more corporations, 
each of which is a member of a parent-subsidiary controlled group or a 
brother-sister-controlled group and one of which is a common parent 
corporation of a parent-subsidiary-controlled group and is also 
included in a brother-sister-controlled group.
    (2) Pursuant to section 414(c) of the IRC and related regulations, 
all employees of trades or businesses (whether or not incorporated) 
that are under common control are treated as employees of a single 
employer. 26 U.S.C. 414(c), 26 CFR 1.414(c)-2.
    (i) Trades or businesses are under common control if they are 
included in:
    (A) A parent-subsidiary group of trades or businesses;
    (B) A brother-sister group of trades or businesses; or
    (C) A combined group of trades or businesses.
    (ii) Trades or businesses include sole proprietorships, 
partnerships, estates, trusts or corporations.
    (ii) The standards for determining whether trades or businesses are 
under common control are similar to standards that apply to controlled 
groups of corporations. However, pursuant to 26 CFR 1.414(c)-2(b)(2), 
ownership of at least an 80 percent interest in the profits or capital 
interest of a partnership or the actuarial value of a trust or estate 
constitutes a controlling interest in a trade or business.
    (3) Pursuant to section 414(m) of the IRC and related regulations, 
all employees of the members of an affiliated service group are treated 
as employees of a single employer. 26 U.S.C. 414(m).
    (i) An affiliated service group is, generally, a group consisting 
of a service organization (the ``first organization''), such as a 
health care organization, a law firm or an accounting firm, and one or 
more of the following:
    (A) A second service organization that is a shareholder or partner 
in the first organization and that regularly performs services for the 
first organization (or is regularly associated with the first 
organization in performing services for third persons); or
    (B) Any other organization if :
    (1) A significant portion of the second organization's business is 
the performance of services for the first organization (or an 
organization described in paragraph (b)(3)(i) of this section or for 
both) of a type historically performed in such service field by 
employees, and
    (2) Ten percent or more of the interest in the second organization 
is held by persons who are highly compensated employees of the first 
organization (or an organization described in paragraph (b)(3)(i) of 
this section).
    (ii) [Reserved]
    (4) Section 414(o) of the IRC provides that the Department of the 
Treasury may issue regulations addressing other business arrangements, 
including employee leasing, in which a group of employees are treated 
as employed by the same employer. However, the Department of the 
Treasury has not issued any regulations under this provision. 
Therefore, that section of the IRC will not be taken into account in 
determining what groups of employees are considered employees of a 
single employer for purposes of H-1B dependency determinations, unless 
regulations are issued by the Treasury Department during the period the 
dependency provisions of the ACWIA are effective.
    (5) The definitions of ``single employer'' set forth in paragraphs 
(b)(1) through (b)(3) of this section are established by the Internal 
Revenue Service (IRS) in regulations located at 26 CFR 1.414(b)-1(a), 
(c)-2 and (m)-5. Guidance on these definitions should be sought from 
those regulations or from the IRS.
    (c) Which employers are required to make determinations of H-1B-
dependency status? Every employer that intends to file an LCA or to 
file H-1B petition(s) or request(s) for extension(s) of H-1B status 
between January 19, 2001 and October 1, 2003 is required to determine 
whether it is an H-1B-dependent employer or a willful violator which, 
except as provided in Sec. 655.737, will be subject to the additional 
obligations for H-1B-dependent employers (see paragraph (g) of this 
section). During this time period, no H-1B-dependent employer or 
willful violator may use an LCA filed before January 19, 2001 to 
support a new H-1B petition or request for an extension of status. 
Furthermore, on all LCAs filed during this period an employer will be 
required to attest as to whether it is an H-1B-dependent employer or 
willful violator. An employer that attests that it is non-H-1B-
dependent but does not meet the ``snap shot'' test set forth in 
paragraph (c)(2) of this section shall make and document a full 
calculation of its status. However, as explained in paragraphs (c)(1) 
and (2), which follow, most employers would not be required to make any 
calculations or to create any documentation as to the determination of 
H-1B status.
    (1) Employers with readily apparent status concerning H-1B-
dependency need not calculate that status. For most employers, 
regardless of their size, H-1B-dependency status (i.e., H-1B-dependent 
or non-H-1B-dependent) is readily apparent and would require no 
calculations, in that the ratio of H-1B employees to the total 
workforce is obvious and can easily be compared to the definition of 
``H-1B-dependency'' (see definition set out in paragraph (a)(1) of this 
section).
    For example: Employer A with 20 employees, only one of whom is an 
H-1B non-immigrant, would obviously not be H-1B-dependent and would not 
need to make calculations to confirm that status. Employer B with 45 
employees, 30 of whom are H-1B nonimmigrants, would obviously be H-1B-
dependent and would not need to make calculations. Employer C with 500 
employees, only 30 of whom are H-1B nonimmigrants, would obviously not 
be H-1B-dependent and would not need to make calculations. Employer D 
with

[[Page 80225]]

1,000 employees, 850 of whom are H-1B nonimmigrants, would obviously be 
H-1B-dependent and would not have to make calculations.
    (2) Employers with borderline H-1B-dependency status may use a 
``snap-shot'' test to determine whether calculation of that status is 
necessary. Where an employer's H-1B-dependency status (i.e., H-1B-
dependent or non-H-1B-dependent) is not readily apparent, the employer 
may use one of the following tests to determine whether a full 
calculation of the status is needed:
    (i) Small employer (50 or fewer employees). If the employer has 50 
or fewer employees (both full-time and part-time, including H-1B 
nonimmigrants and U.S. workers), then the employer may compare the 
number of its H-1B nonimmigrant employees (both full-time and part-
time) to the numbers specified in the definition set out in paragraph 
(a)(1) of this section, and shall fully calculate its H-1B-dependency 
status (i.e., calculate FTEs) where the number of its H-1B nonimmigrant 
employees is above the number specified in the definition. In other 
words, if the employer has 25 or fewer employees, and more than seven 
of them are H-1B nonimmigrants, then the employer shall fully calculate 
its status; if the employer has at least 26 but no more than 50 
employees, and more than 12 of them are H-1B nonimmigrants, then the 
employer shall fully calculate its status.
    (ii) Large employer (51 or more employees). If the number of H-1B 
nonimmigrant employees (both full-time and part-time), divided by the 
number of full-time employees (including H-1B nonimmigrants and U.S. 
workers), is 0.15 or more, then an employer which believes itself to be 
non-H-1B-dependent shall fully calculate its H-1B-dependency status 
(including the calculation of FTEs). In other words, if the number of 
full-time employees (including H-1B nonimmigrants and U.S. workers) 
multiplied by 0.15 yields a number that is equal to or less than the 
number of H-1B nonimmigrant employees (both full-time and part-time), 
then the employer shall attest that it is H-1B-dependent or shall fully 
calculate its H-1B dependency status (including the calculation of 
FTEs).
    (d) What documentation is the employer required to make or 
maintain, concerning its determination of H-1B-dependency status? All 
employers are required to retain copies of H-1B petitions and requests 
for extensions of H-1B status filed with the INS, as well as the 
payroll records described in Sec. 655.731(b)(1). The nature of any 
additional documentation would depend upon the general characteristics 
of the employer's workforce, as described in paragraphs (d)(1) through 
(4), which follow.
    (1) Employer with readily apparent status concerning H-1B-
dependency. If an employer's H-1B-dependency status (i.e., H-1B-
dependent or non-H-1B-dependent) is readily apparent (as described in 
paragraph (c)(1) of this section), then that status must be reflected 
on the employer's LCA but the employer is not required to make or 
maintain any particular documentation. The public access file 
maintained in accordance with Sec. 655.760 would show the H-1B-
dependency status, by means of copy(ies) of the LCA(s). In the event of 
an enforcement action pursuant to subpart I of this part, the 
employer's readily apparent status could be verified through records to 
be made available to the Administrator (e.g., copies of H-1B petitions; 
payroll records described in Sec. 655.731(b)(1)).
    (2) Employer with borderline H-1B-dependency status. An employer 
which uses a ``snap-shot'' test to determine whether it should 
undertake a calculation of its H-1B-dependency status (as described in 
paragraph (c)(2) of this section) is not required to make or maintain 
any documentation of that ``snap-shot'' test. The employer's status 
must be reflected on the LCA(s), which would be available in the public 
access file. In the event of an enforcement action pursuant to subpart 
I of this part, the employer's records to be made available to the 
Administrator would enable the employer to show and the Administrator 
to verify the ``snap-shot'' test (e.g., copies of H-1B petitions; 
payroll records described in Sec. 655.731(b)(1)) .
    (3) Employer with H-1B-dependent status. An employer which attests 
that it is H-1B-dependent--whether that status is readily apparent or 
is determined through calculations--is not required to make or maintain 
any documentation of the calculation. The employer's status must be 
reflected on the LCA(s), which would be available in the public access 
file. In the event of an enforcement action pursuant to subpart I of 
this part, the employer's designation of H-1B-dependent status on the 
LCA(s) would be conclusive and sufficient documentation of that status 
(except where the employer's status had altered to non-H-1B-dependent 
and had been appropriately documented, as described in paragraph 
(d)(5)(ii) of this section).
    (4) Employer with non-H-1B-dependent status who is required to 
perform full calculation. An employer which attests that it is non-H-
1B-dependent and does not meet the ``snap shot'' test set forth in 
paragraph (c)(2) of this section shall retain in its records a dated 
copy of its calculation that it is not H-1B-dependent. In the event of 
an enforcement action pursuant to subpart I of this part, the 
employer's records to be made available to the Administrator would 
enable the employer to show and the Administrator to verify the 
employer's determination (e.g., copies of H-1B petitions; payroll 
records described in Sec. 655.731(b)(1)).
    (5) Employer which changes its H-1B-dependency status due to 
changes in workforce. An employer may experience a change in its H-1B-
dependency status, due to changes in the ratio of H-1B nonimmigrant to 
U.S. workers in its workforce. Thus it is important that employers who 
wish to file a new LCA or a new H-1B petition or request for extension 
of status remain cognizant of their dependency status and do a recheck 
of such status if the make-up of their workforce changes sufficiently 
that their dependency status might possibly change. In the event of 
such a change of status, the following standards will apply:
    (i) Change from non-H-1B-dependent to H-1B-dependent. An employer 
which experiences this change in its workforce is not required to make 
or maintain any record of its determination of the change of its H-1B-
dependency status. The employer is not required to file new LCA(s) 
(which would accurately state its H-1B-dependent status), unless it 
seeks to hire new H-1B nonimmigrants or extend the status of existing 
H-1B nonimmigrants (see paragraph (g) of this section).
    (ii) Change from H-1B-dependent to non-H-1B-dependent. An employer 
which experiences this change in its workforce is required to perform a 
full calculation of its status (as described in paragraph (c) of this 
section) and to retain a copy of such calculation in its records. If 
the employer seeks to hire new H-1B nonimmigrants or extend the status 
of existing H-1B nonimmigrants (see paragraph (g) of this section), the 
employer shall either file new LCAs reflecting its non-H-1B-dependent 
status or use its existing certified LCAs reflecting an H-1B-dependency 
status, in which case it shall continue to be bound by the dependent-
employer attestations on such LCAs. In the event of an enforcement 
action pursuant to subpart I of this part, the employer's records to be 
made available to the Administrator would enable the employer to show 
and the Administrator to verify the employer's determination (e.g., 
copies of H-1B petitions; payroll records described in 
Sec. 655.731(b)(1)).

[[Page 80226]]

    (6) Change in corporate structure or identity of employer. If an 
employer which experiences a change in its corporate structure as the 
result of an acquisition, merger, ``spin-off,'' or other such action 
wishes to file a new LCA or a new H-1B petition or request for 
extension of status, the new employing entity shall redetermine its H-
1B-dependency status in accordance with paragraphs (a) and (c) of this 
section (see paragraph (g) of this section). (See Sec. 655.730(e), 
regarding change in corporate structure or identity of employer.) In 
the event of an enforcement action pursuant to subpart I of this part, 
the employer's calculations where required under paragraph (c) of this 
section and its records to be made available to the Administrator would 
enable the employer to show and the Administrator to verify the 
employer's determination (e.g., copies of H-1B petitions; payroll 
records described in Sec. 655.731(b)(1)).
    (7) ``Single employer'' under IRC test. If an employer utilizes the 
IRC single-employer definition and concludes that it is non-H-1B-
dependent, the employer shall perform the ``snap-shot'' test set forth 
in paragraph (c)(2) of this section, and if it fails to meet that test, 
shall attest that it is H-1B-dependent or shall perform the full 
calculation of dependency status in accordance with paragraph (a) of 
this section. The employer shall place a list of the entities included 
as a ``single employer'' in the public access file maintained in 
accordance with Sec. 766.760. In addition, the employer shall retain in 
its records the ``snap-shot'' or full calculation of its status, as 
appropriate (showing the number of employees of each entity who are 
included in the numerator and denominator of the equation, whether the 
employer utilizes the ``snap shot'' test or a complete calculation as 
described in paragraph (c) of this section). In the event of an 
enforcement action pursuant to subpart I of this part, the employer's 
records to be made available to the Administrator would enable the 
employer to show and the Administrator to verify the employer's 
determination (e.g., copies of H-1B petitions; payroll records 
described in Sec. 655.731(b)(1)).
    (e) How is an employer's H-1B-dependency status to be shown on the 
LCA? The employer is required to designate its status by marking the 
appropriate box on the Form ETA-9035 (i.e., either H-1B-dependent or 
non-H-1B-dependent). An employer which marks the designation of ``H-1B-
dependent'' may also mark the designation of its intention to seek only 
``exempt'' H-1B nonimmigrants on the LCA (see paragraph (g) of this 
section, and Sec. 655.737). In the event that an employer has filed an 
LCA designating its H-1B-dependency status (either H-1B-dependent or 
non-H-1B-dependent) and thereafter experiences a change of status, the 
employer cannot use that LCA to support H-1B petitions for new 
nonimmigrants or requests for extension of H-1B status for existing 
nonimmigrants. Similarly, an employer that is or becomes H-1B-dependent 
cannot continue to use an LCA filed before January 19, 2001 to support 
new H-1B petitions or requests for extension of status. In such 
circumstances, the employer shall file a new LCA accurately designating 
its status and shall use that new LCA to support new petitions or 
requests for extensions of status.
    (f) What constitutes a ``willful violator'' employer and what are 
its special obligations?
    (1) ``Willful violator'' or ``willful violator employer,'' for 
purposes of this subpart H and subpart I of this part means an employer 
that meets all of the following standards (i.e., paragraphs (f)(1)(i) 
through (iii))--
    (i) A finding of violation by the employer (as described in 
paragraph (f)(1) (ii)) is entered in either of the following two types 
of enforcement proceeding:
    (A) A Department of Labor proceeding under section 212(n)(2) of the 
Act (8 U.S.C. 1182(n)(2)(C) and subpart I of this part; or
    (B) A Department of Justice proceeding under section 212(n)(5) of 
the Act (8 U.S.C. 1182(n)(5).
    (ii) The agency finds that the employer has committed either a 
willful failure or a misrepresentation of a material fact during the 
five-year period preceding the filing of the LCA; and
    (iii) The agency's finding is entered on or after October 21, 1998.
    (2) For purposes of this paragraph, ``willful failure'' means a 
violation which is a ``willful failure'' as defined in Sec. 655.805(c).
    (g) What LCAs are subject to the additional attestation 
obligations?
    (1) An employer that is ``H-1B-dependent'' (under the standards 
described in paragraphs (a) through (e) of this section) or is a 
``willful violator'' (under the standards described in paragraph (f) of 
this section) is subject to the attestation obligations regarding 
displacement of U.S. workers and recruitment of U.S. workers (under the 
standards described in Secs. 655.738 and 655.739, respectively) for all 
LCAs that are filed during the time period specified in paragraph 
(2)(g) of this section, to be used to support any petitions for new H-
1B nonimmigrants or any requests for extensions of status for existing 
H-1B nonimmigrants. An LCA which does not accurately indicate the 
employer's H-1B-dependency status or willful violator status shall not 
be used to support H-1B petitions or requests for extensions. Further, 
an employer which falsely attests to non-H-1B-dependency status, or 
which experiences a change of status to H-1B-dependency but continues 
to use the LCA to support new H-1B petitions or requests for extension 
of status shall--despite the LCA designation of non-H-1B-dependency--be 
held to its obligations to comply with the attestation requirements 
concerning nondisplacement of U.S. workers and recruitment of U.S. 
workers (as described in Secs. 655.738 and 655.739, respectively), as 
explicitly acknowledged and agreed on the LCA.
    (2) During the period between January 19, 2001 and October 1, 2003, 
any employer that is ``H-1B-dependent'' (under the standards described 
in paragraphs (a) through (e) of this section) or is a ``willful 
violator'' (under the standards described in paragraph (f) of this 
section) shall file a new LCA accurately indicating that status in 
order to be able to file petition(s) for new H-1B nonimmigrant(s) or 
request(s) for extension(s) of status for existing H-1B 
nonimmigrant(s). An LCA filed prior to January 19, 2001 may not be used 
to support petition(s) for new H-1B nonimmigrant(s) or request(s) for 
extension(s) of status for existing H-1B nonimmigrants.
    (3) An employer that files an LCA indicating ``H-1B-dependent'' 
and/or ``willful violator'' status may also indicate on the LCA that 
all the H-1B nonimmigrants to be employed pursuant to that LCA will be 
``exempt H-1B nonimmigrants'' as described in Sec. 655.737. Such an LCA 
is not subject to the additional LCA attestation obligations, provided 
that all H-1B nonimmigrants employed under it are, in fact, exempt. An 
LCA which indicates that it will be used only for exempt H-1B 
nonimmigrants shall not be used to support H-1B petitions or requests 
for extensions of status for H-1B nonimmigrants who are not, in fact, 
exempt. Further, an employer which attests that the LCA will be used 
only for exempt H-1B nonimmigrants but uses the LCA to employ non-
exempt H-1B nonimmigrants (through petitions and/or extensions of 
status) shall--despite the LCA designation of exempt H-1B 
nonimmigrants--be held to its obligations to comply with the 
attestation requirements concerning

[[Page 80227]]

nondisplacement of U.S. workers and recruitment of U.S. workers (as 
described in Secs. 655.738 and 655.739, respectively), as explicitly 
acknowledged and agreed on the LCA.
    (4) The special provisions for H-1B-dependent employers and willful 
violator employers do not apply to LCAs filed after October 1, 2003 
(see 8 U.S.C. 1182(n)(1)(E)(ii)). However, all LCAs filed prior to that 
date, and containing the additional attestation obligations described 
in this section and Secs. 655.737 through 655.739, will remain in 
effect with regard to those obligations, for so long as any H-1B 
nonimmigrant(s) employed pursuant to the LCA(s) remain employed by the 
employer.

    16. Section 655.737 is added to read as follows:


Sec. 655.737  What are ``exempt'' H-1B nonimmigrants, and how does 
their employment affect the additional attestation obligations of H-1B-
dependent employers and willful violator employers?

    (a) An employer that is H-1B-dependent or a willful violator of the 
H-1B program requirements (as described in Sec. 655.736) is subject to 
the attestation obligations regarding displacement of U.S. workers and 
recruitment of U.S. workers (as described in Secs. 655.738 and 655.739, 
respectively) for all LCAs that are filed during the time period 
specified in Sec. 655.736(g). However, these additional obligations do 
not apply to an LCA filed by such an employer if the LCA is used only 
for the employment of ``exempt'' H-1B nonimmigrants (through petitions 
and/or extensions of status) as described in this section.
    (b) What is the test or standard for determining an H-1B 
nonimmigrant's ``exempt'' status? An H-1B nonimmigrant is ``exempt'' 
for purposes of this section if the nonimmigrant meets either of the 
two following criteria:
    (1) Receives wages (including cash bonuses and similar 
compensation) at an annual rate equal to at least $60,000; or
    (2) Has attained a master's or higher degree (or its equivalent) in 
a specialty related to the intended employment.
    (c) How is the $60,000 annual wage to be determined? The H-1B 
nonimmigrant can be considered to be an ``exempt'' worker, for purposes 
of this section, if the nonimmigrant actually receives hourly wages or 
annual salary totaling at least $60,000 in the calendar year. The 
standards applicable to the employer's satisfaction of the required 
wage obligation are applicable to the determination of whether the 
$60,000 wages or salary are received (see Sec. 655.731(c)(2) and (3)). 
Thus, employer contributions or costs for benefits such as health 
insurance, life insurance, and pension plans cannot be counted toward 
this $60,000. The compensation to be counted or credited for these 
purposes could include cash bonuses and similar payments, provided that 
such compensation is paid to the worker ``cash in hand, free and clear, 
when due'' (Sec. 655.731(c)(1)), meaning that the compensation has 
readily determinable market value, is readily convertible to cash 
tender, and is actually received by the employee when due (which must 
be within the year for which the employer seeks to count or credit the 
compensation toward the employee's $60,000 earnings to qualify for 
exempt status). Cash bonuses and similar compensation can be counted or 
credited toward the $60,000 for ``exempt'' status only if payment is 
assured (i.e., if the payment is contingent or conditional on some 
event such as the employer's annual profits, the employer must 
guarantee payment even if the contingency is not met). The full $60,000 
annual wages or salary must be received by the employee in order for 
the employee to have ``exempt'' status. The wages or salary required 
for ``exempt'' status cannot be decreased or pro rated based on the 
employee's part-time work schedule; an H-1B nonimmigrant working part-
time, whose actual annual compensation is less than $60,000, would not 
qualify as exempt on the basis of wages, even if the worker's earnings, 
if projected to a full-time work schedule, would theoretically exceed 
$60,000 in a year. Where an employee works for less than a full year, 
the employee must receive at least the appropriate pro rata share of 
the $60,000 in order to be ``exempt'' (e.g., an employee who resigns 
after three months must be paid at least $15,000). In the event of an 
investigation pursuant to subpart I of this part, the Administrator 
will determine whether the employee has received the required $60,000 
per year, using the employee's anniversary date to determine the one-
year period; for an employee who had worked for less than a full year 
(either at the beginning of employment, or after his/her last 
anniversary date), the determination as to the $60,000 annual wages 
will be on a pro rata basis (i.e., whether the employee had been paid 
at a rate of $60,000 per year (or $5,000 per month) including any 
unpaid, guaranteed bonuses or similar compensation).
    (d) How is the ``master's or higher degree (or its equivalent) in a 
specialty related to the intended employment'' to be determined? 
    (1) ``Master's or higher degree (or its equivalent),'' for purposes 
of this section means a foreign academic degree from an institution 
which is accredited or recognized under the law of the country where 
the degree was obtained, and which is equivalent to a master's or 
higher degree issued by a U.S. academic institution. The equivalence to 
a U.S. academic degree cannot be established through experience or 
through demonstration of expertise in the academic specialty (i.e., no 
``time equivalency'' or ``performance equivalency'' will be recognized 
as substituting for a degree issued by an academic institution). The 
INS and the Department will consult appropriate sources of expertise in 
making the determination of equivalency between foreign and U.S. 
academic degrees. Upon the request of the INS or the Department, the 
employer shall provide evidence to establish that the H-1B nonimmigrant 
has received the degree, that the degree was earned in the asserted 
field of study, including an academic transcript of courses, and that 
the institution from which the degree was obtained was accredited or 
recognized.
    (2) ``Specialty related to the intended employment,'' for purposes 
of this section, means that the academic degree is in a specialty which 
is generally accepted in the industry or occupation as an appropriate 
or necessary credential or skill for the person who undertakes the 
employment in question. A ``specialty'' which is not generally accepted 
as appropriate or necessary to the employment would not be considered 
to be sufficiently ``related' to afford the H-1B nonimmigrant status as 
an ``exempt H-1B nonimmigrant.''
    (e) When and how is the determination of the H-1B nonimmigrant's 
``exempt'' status to be made? An employer that is H-1B-dependent or a 
willful violator (as described in Sec. 655.736) may designate on the 
LCA that the LCA will be used only to support H-1B petition(s) and/or 
request(s) for extension of status for ``exempt'' H-1B nonimmigrants.
    (1) If the employer makes the designation of ``exempt'' H-1B 
nonimmigrant(s) on the LCA, then the INS--as part of the adjudication 
of the H-1B petition or request for extension of status--will determine 
the worker's ``exempt'' status, since an H-1B petition must be 
supported by an LCA consistent with the petition (i.e., occupation, 
area of intended employment, exempt status). The employer shall 
maintain, in the public access file maintained in

[[Page 80228]]

accordance with Sec. 755.760, a list of the H-1B nonimmigrant(s) whose 
petition(s) and/or request(s) are supported by LCA(s) which the 
employer has attested will be used only for exempt H-1B nonimmigrants. 
In the event of an investigation under subpart I of this part, the 
Administrator will give conclusive effect to an INS determination of 
``exempt'' status based on the nonimmigrant's educational attainments 
(i.e., master's or higher degree (or its equivalent) in a specialty 
related to the intended employment) unless the determination was based 
on false information. If the INS determination of ``exempt'' status was 
based on the assertion that the nonimmigrant would receive wages 
(including cash bonuses and similar compensation) at an annual rate 
equal to at least $60,000, the employer shall provide evidence to show 
that such wages actually were received by the nonimmigrant (consistent 
with paragraph (c) of this section and the regulatory standards for 
satisfaction or payment of the required wages as described in 
Sec. 655.731(c)(3)).
    (2) If the employer makes the designation of ``exempt'' H-1B 
nonimmigrants on the LCA, but is found in an enforcement action under 
subpart I of this part to have used the LCA to employ nonimmigrants who 
are, in fact, not exempt, then the employer will be subject to a 
finding that it failed to comply with the nondisplacement and 
recruitment obligations (as described in Secs. 655.738 and 655.739, 
respectively) and may be assessed appropriate penalties and remedies.
    (3) If the employer does not make the designation of ``exempt'' H-
1B nonimmigrants on the LCA, then the employer has waived the option of 
not being subject to the additional LCA attestation obligations on the 
basis of employing only exempt H-1B nonimmigrants under the LCA. In the 
event of an investigation under subpart I of this part, the 
Administrator will not consider the question of the nonimmigrant(s)'s 
``exempt'' status in determining whether an H-1B-dependent employer or 
willful violator employer has complied with such additional LCA 
attestation obligations.

    17. Section 655.738 is added to read as follows:


Sec. 655.738  What are the ``non-displacement of U.S. workers'' 
obligations that apply to H-1B-dependent employers and willful 
violators, and how do they operate?

    An employer that is subject to these additional attestation 
obligations (under the standards described in Sec. 655.736) is 
prohibited from displacement of any U.S. worker(s)--whether directly 
(in its own workforce) or secondarily (at a worksite of a second 
employer)--under the standards set out in this section.
    (a) ``United States worker'' (``U.S. worker'') is defined in 
Sec. 655.715.
    (b) ``Displacement,'' for purposes of this section, has two 
components: ``lay off'' of U.S. worker(s), and ``essentially equivalent 
jobs'' held by U.S. worker(s) and H-1B nonimmigrant(s).
    (1) ``Lay off'' of a U.S. worker means that the employer has caused 
the worker's loss of employment, other than through--
    (i) Discharge of a U.S. worker for inadequate performance, 
violation of workplace rules, or other cause related to the worker's 
performance or behavior on the job;
    (ii) A U.S. worker's voluntary departure or voluntary retirement 
(to be assessed in light of the totality of the circumstances, under 
established principles concerning ``constructive discharge'' of workers 
who are pressured to leave employment);
    (iii) Expiration of a grant or contract under which a U.S. worker 
is employed, other than a temporary employment contract entered into in 
order to evade the employer's non-displacement obligation. The question 
is whether the loss of the contract or grant has caused the worker's 
loss of employment. It would not be a layoff where the job loss results 
from the expiration of a grant or contract without which there is no 
alternative funding or need for the U.S. worker's position on that or 
any other grant or contract (e.g., the expiration of a research grant 
that funded a project on which the worker was employed at an academic 
or research institution; the expiration of a staffing firm's contract 
with a customer where the U.S. worker was hired expressly to work 
pursuant to that contract and the employer has no practice of moving 
workers to other customers or projects upon the expiration of 
contract(s)). On the other hand, it would be a layoff where the 
employer's normal practice is to move the U.S. worker from one contract 
to another when a contract expires, and work on another contract for 
which the worker is qualified is available (e.g., staffing firm's 
contract with one customer ends and another contract with a different 
customer begins); or
    (iv) A U.S. worker who loses employment is offered, as an 
alternative to such loss, a similar employment opportunity with the 
same employer (or, in the case of secondary displacement at a worksite 
of a second employer, as described in paragraph (d) of this section, a 
similar employment opportunity with either employer) at equivalent or 
higher compensation and benefits than the position from which the U.S. 
worker was discharged, regardless of whether or not the U.S. worker 
accepts the offer. The validity of the offer of a similar employment 
opportunity will be assessed in light of the following factors:
    (A) The offer is a bona fide offer, rather than an offer designed 
to induce the U.S. worker to refuse or an offer made with the 
expectation that the worker will refuse;
    (B) The offered job provides the U.S. worker an opportunity similar 
to that provided in the job from which he/she is discharged, in terms 
such as a similar level of authority, discretion, and responsibility, a 
similar opportunity for advancement within the organization, and 
similar tenure and work scheduling;
    (C) The offered job provides the U.S. worker equivalent or higher 
compensation and benefits to those provided in the job from which he/
she is discharged. The comparison of compensation and benefits includes 
all forms of remuneration for employment, whether or not called wages 
and irrespective of the time of payment (e.g., salary or hourly wage 
rate; profit sharing; retirement plan; expense account; use of company 
car). The comparison also includes such matters as cost of living 
differentials and relocation expenses (e.g., a New York City 
``opportunity'' at equivalent or higher compensation and benefits 
offered to a worker discharged from a job in Kansas City would provide 
a wage adjustment from the Kansas City pay scale and would include 
relocation costs).
    (2) Essentially equivalent jobs. For purposes of the displacement 
prohibition, the job from which the U.S. worker is laid off must be 
essentially equivalent to the job for which an H-1B nonimmigrant is 
sought. To determine whether the jobs of the laid off U.S. worker(s) 
and the H-1B nonimmigrant(s) are essentially equivalent, the 
comparison(s) shall be on a one-to-one basis where appropriate (i.e., 
one U.S. worker left employment and one H-1B nonimmigrant joined the 
workforce) but shall be broader in focus where appropriate (e.g., an 
employer, through reorganization, eliminates an entire department with 
several U.S. workers and then staffs this department's function(s) with 
H-1B nonimmigrants). The following comparisons are to be made:
    (i) Job responsibilities. The job of the H-1B nonimmigrant must 
involve essentially the same duties and responsibilities as the job 
from which the U.S. worker was laid off. The

[[Page 80229]]

comparison focuses on the core elements of and competencies for the 
job, such as supervisory duties, or design and engineering functions, 
or budget and financial accountability. Peripheral, non-
essential duties that could be tailored to the particular abilities of 
the individual workers would not be determinative in this comparison. 
The job responsibilities must be similar and both workers capable of 
performing those duties.
    (ii) Qualifications and experience of the workers. The 
qualifications of the laid off U.S. worker must be substantially 
equivalent to the qualifications of the H-1B nonimmigrant. The 
comparison is to be confined to the experience and qualifications 
(e.g., training, education, ability) of the workers which are directly 
relevant to the actual performance requirements of the job, including 
the experience and qualifications that would materially affect a 
worker's relative ability to perform the job better or more 
efficiently. While it would be appropriate to compare whether the 
workers in question have ``substantially equivalent'' qualifications 
and experience, the workers need not have identical qualifications and 
experience (e.g., a bachelor's degree from one accredited university 
would be considered to be substantially equivalent to a bachelor's 
degree from another accredited university; 15 years experience in an 
occupation would be substantially equivalent to 10 years experience in 
that occupation). It would not be appropriate to compare the workers' 
relative ages, their sexes, or their ethnic or religious identities.
    (iii) Area of employment. The job of the H-1B nonimmigrant must be 
located in the same area of employment as the job from which the U.S. 
worker was laid off. The comparison of the locations of the jobs is 
confined to the area within normal commuting distance of the worksite 
or physical location where the work of the H-1B nonimmigrant is or will 
be performed. For purposes of this comparison, if both such worksites 
or locations are within a Metropolitan Statistical Area or a Primary 
Metropolitan Statistical Area, they will be deemed to be within the 
same area of employment.
    (3) The worker's rights under a collective bargaining agreement or 
other employment contract are not affected by the employer's LCA 
obligations as to non-displacement of such worker.
    (c) Direct displacement. An H-1B-dependent or willful-violator 
employer (as described in Sec. 655.736) is prohibited from displacing a 
U.S. worker in its own workforce (i.e., a U.S. worker ``employed by the 
employer'') within the period beginning 90 days before and ending 90 
days after the filing date of an H-1B petition supported by an LCA 
described in Sec. 655.736(g). The following standards and guidance 
apply under the direct displacement prohibition:
    (1) Which U.S. workers are protected against ``direct 
displacement''? This prohibition covers the H-1B employer's own 
workforce--U.S. workers ``employed by the employer''--who are employed 
in jobs that are essentially equivalent to the jobs for which the H-1B 
nonimmigrant(s) are sought (as described in paragraph (b)(2) of this 
section). The term ``employed by the employer'' is defined in 
Sec. 655.715.
    (2) When does the ``direct displacement'' prohibition apply? The H-
1B employer is prohibited from displacing a U.S. worker during a 
specific period of time before and after the date on which the employer 
files any H-1B petition supported by the LCA which is subject to the 
non-displacement obligation (as described in Sec. 655.736(g)). This 
protected period is from 90 days before until 90 days after the 
petition filing date.
    (3) What constitutes displacement of a U.S. worker? The H-1B 
employer is prohibited from laying off a U.S. worker from a job that is 
essentially the equivalent of the job for which an H-1B nonimmigrant is 
sought (as described in paragraph (b)(1) of this section).
    (d) Secondary displacement. An H-1B-dependent or willful-violator 
employer (as described in Sec. 655.736) is prohibited from placing 
certain H-1B nonimmigrant(s) with another employer where there are 
indicia of an employment relationship between the nonimmigrant and that 
other employer (thus possibly affecting the jobs of U.S. workers 
employed by that other employer), unless and until the H-1B employer 
makes certain inquiries and/or has certain information concerning that 
other employer's displacement of similarly employed U.S. workers in its 
workforce. Employers are cautioned that even if the required inquiry of 
the secondary employer is made, the H-1B-dependent or willful violator 
employer shall be subject to a finding of a violation of the secondary 
displacement prohibition if the secondary employer, in fact, displaces 
any U.S. worker(s) during the applicable time period (see 
Sec. 655.810(d)). The following standards and guidance apply under the 
secondary displacement prohibition:
    (1) Which U.S. workers are protected against ``secondary 
displacement''? This provision applies to U.S. workers employed by the 
other or ``secondary'' employer (not those employed by the H-1B 
employer) in jobs that are essentially equivalent to the jobs for which 
certain H-1B nonimmigrants are placed with the other/secondary employer 
(as described in paragraph (b)(2) of this section). The term ``employed 
by the employer'' is defined in Sec. 655.715.
    (2) Which H-1B nonimmigrants activate the secondary displacement 
prohibition? Not every placement of an H-1B nonimmigrant with another 
employer will activate the prohibition and--depending upon the 
particular facts--an H-1B employer (such as a service provider) may be 
able to place H-1B nonimmigrant(s) at a client or customer's worksite 
without being subject to the prohibition. The prohibition applies to 
the placement of an H-1B nonimmigrant whose H-1B petition is supported 
by an LCA described in Sec. 655.736(g) and whose placement with the 
other/secondary employer meets both of the following criteria:
    (i) The nonimmigrant performs duties in whole or in part at one or 
more worksites owned, operated, or controlled by the other/secondary 
employer; and
    (ii) There are indicia of an employment relationship between the 
nonimmigrant and the other/secondary employer. The relationship between 
the H-1B-nonimmigrant and the other/secondary need not constitute an 
``employment'' relationship (as defined in Sec. 655.715), and the 
applicability of the secondary displacement provision does not 
establish such a relationship. Relevant indicia of an employment 
relationship include:
    (A) The other/secondary employer has the right to control when, 
where, and how the nonimmigrant performs the job (the presence of this 
indicia would suggest that the relationship between the nonimmigrant 
and the other/secondary employer approaches the relationship which 
triggers the secondary displacement provision);
    (B) The other/secondary employer furnishes the tools, materials, 
and equipment;
    (C) The work is performed on the premises of the other/secondary 
employer (this indicia alone would not trigger the secondary 
displacement provision);
    (D) There is a continuing relationship between the nonimmigrant and 
the other/secondary employer;
    (E) The other/secondary employer has the right to assign additional 
projects to the nonimmigrant;

[[Page 80230]]

    (F) The other/secondary employer sets the hours of work and the 
duration of the job;
    (G) The work performed by the nonimmigrant is part of the regular 
business (including governmental, educational, and non-profit 
operations) of the other/secondary employer;
    (H) The other/secondary employer is itself in business; and
    (I) The other/secondary employer can discharge the nonimmigrant 
from providing services.
    (3) What other/secondary employers are included in the prohibition 
on secondary displacement of U.S. workers by the H-1B employer? The 
other/secondary employer who accepts the placement and/or services of 
the H-1B employer's nonimmigrant employee(s) need not be an H-1B 
employer. The other/secondary employer would often be (but is not 
limited to) the client or customer of an H-1B employer that is a 
staffing firm or a service provider which offers the services of H-1B 
nonimmigrants under a contract (e.g., a medical staffing firm under 
contract with a nursing home provides H-1B nonimmigrant physical 
therapists; an information technology staffing firm under contract with 
a bank provides H-1B nonimmigrant computer engineers). Only the H-1B 
employer placing the nonimmigrant with the secondary employer is 
subject to the non-displacement obligation on the LCA, and only that 
employer is liable in an enforcement action pursuant to subpart I of 
this part if the other/secondary employer, in fact, displaces any of 
its U.S. worker(s) during the applicable time period. The other/
secondary employer will not be subject to sanctions in an enforcement 
action pursuant to subpart I of this part (except in circumstances 
where such other/secondary employer is, in fact, an H-1B employer and 
is found to have failed to comply with its own obligations). (Note to 
paragraph (d)(3): Where the other/secondary employer's relationship to 
the H-1B nonimmigrant constitutes ``employment'' for purposes of a 
statute other than the H-1B provision of the INA, such as the Fair 
Labor Standards Act (29 U.S.C. 201 et seq.), the other/secondary 
employer would be subject to all obligations of an employer of the 
nonimmigrant under such other statute.)
    (4) When does the ``secondary displacement'' prohibition apply? The 
H-1B employer's obligation of inquiry concerns the actions of the 
other/secondary employer during the specific period beginning 90 days 
before and ending 90 days after the date of the placement of the H-1B 
nonimmigrant(s) with such other/secondary employer.
    (5) What are the H-1B employer's obligations concerning inquiry 
and/or information as to the other/secondary employer's displacement of 
U.S. workers? The H-1B employer is prohibited from placing the H-1B 
nonimmigrant with another employer, unless the H-1B employer has 
inquired of the other/secondary employer as to whether, and has no 
knowledge that, within the period beginning 90 days before and ending 
90 days after the date of such placement, the other/secondary employer 
has displaced or intends to displace a similarly-employed U.S. worker 
employed by such other/secondary employer. The following standards and 
guidance apply to the H-1B employer's obligation:
    (i) The H-1B employer is required to exercise due diligence and to 
make a reasonable effort to enquire about potential secondary 
displacement, through methods which may include (but are not limited 
to)--
    (A) Securing and retaining a written assurance from the other/
secondary employer that it has not and does not intend to displace a 
similarly-employed U.S. worker within the prescribed period;
    (B) Preparing and retaining a memorandum to the file, prepared at 
the same time or promptly after receiving the other/secondary 
employer's oral statement that it has not and does not intend to 
displace a similarly-employed U.S. worker within the prescribed period 
(such memorandum shall include the substance of the conversation, the 
date of the communication, and the names of the individuals who 
participated in the conversation, including the person(s) who made the 
inquiry on behalf of the H-1B employer and made the statement on behalf 
of the other/secondary employer); or
    (C) including a secondary displacement clause in the contract 
between the H-1B employer and the other/secondary employer, whereby the 
other/secondary employer would agree that it has not and will not 
displace similarly-employed U.S. workers within the prescribed period.
    (ii) The employer's exercise of due diligence may require further, 
more particularized inquiry of the other/secondary employer in 
circumstances where there is information which indicates that U.S. 
worker(s) have been or will be displaced (e.g., where the H-1B 
nonimmigrants will be performing functions that the other/secondary 
employer performed with its own workforce in the past). The employer is 
not permitted to disregard information which would provide knowledge 
about potential secondary displacement (e.g., newspaper reports of 
relevant lay-offs by the other/secondary employer) if such information 
becomes available before the H-1B employer's placement of H-1B 
nonimmigrants with such employer. Under such circumstances, the H-1B 
employer would be expected to recontact the other/secondary employer 
and receive credible assurances that no lay-offs of similarly-employed 
U.S. workers are planned or have occurred within the prescribed period.
    (e) What documentation is required of H-1B employers concerning the 
non-displacement obligation? The H-1B employer is responsible for 
demonstrating its compliance with the non-displacement obligation 
(whether direct or indirect), if applicable.
    (1) Concerning direct displacement (as described in paragraph (c) 
of this section), the employer is required to retain all records the 
employer creates or receives concerning the circumstances under which 
each U.S. worker, in the same locality and same occupation as any H-1B 
nonimmigrant(s) hired, left its employ in the period from 90 days 
before to 90 days after the filing date of the employer's petition for 
the H-1B nonimmigrant(s), and for any such U.S. worker(s) for whom the 
employer has taken any action during the period from 90 days before to 
90 days after the filing date of the H-1B petition to cause the U.S. 
worker's termination (e.g., a notice of future termination of the 
employee's job). For all such employees, the H-1B employer shall retain 
at least the following documents: the employee's name, last-known 
mailing address, occupational title and job description; any 
documentation concerning the employee's experience and qualifications, 
and principal assignments; all documents concerning the departure of 
such employees, such as notification by the employer of termination of 
employment prepared by the employer or the employee and any responses 
thereto, and evaluations of the employee's job performance. Finally, 
the employer is required to maintain a record of the terms of any 
offers of similar employment to such U.S. workers and the employee's 
response thereto.
    (2) Concerning secondary displacement (as described in paragraph 
(d) of this section), the H-1B employer is required to maintain 
documentation to show the manner in which it satisfied its obligation 
to make inquiries as to the displacement of U.S. workers by the other/
secondary employer with which the H-1B employer places any H-1B

[[Page 80231]]

nonimmigrants (as described in paragraph (d)(5) of this section).

    18. Section 655.739 is added to read as follows:


Sec. 655.739  What is the ``recruitment of U.S. workers'' obligation 
that applies to H-1B-dependent employers and willful violators, and how 
does it operate?

    An employer that is subject to this additional attestation 
obligation (under the standards described in Sec. 655.736) is 
required--prior to filing the LCA or any petition or request for 
extension of status supported by the LCA--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/are 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 Sec. 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. This section 
provides guidance for the employer's compliance with the recruitment 
obligation.
    (a) ``United States worker'' (``U.S. worker'') is defined in 
Sec. 655.715.
    (b) ``Industry,'' for purposes of this section, means the set of 
employers which primarily compete for the same types of workers as 
those who are the subjects of the H-1B petitions to be filed pursuant 
to the LCA. Thus, a hospital, university, or computer software 
development firm is to use the recruitment standards utilized by the 
health care, academic, or information technology industries, 
respectively, in hiring workers in the occupations in question. 
Similarly, a staffing firm, which places its workers at job sites of 
other employers, is to use the recruitment standards of the industry 
which primarily employs such workers (e.g., the health care industry, 
if the staffing firm is placing physical therapists (whether in 
hospitals, nursing homes, or private homes); the information technology 
industry, if the staffing firm is placing computer programmers, 
software engineers, or other such workers).
    (c) ``Recruitment,'' for purposes of this section, means the 
process by which an employer seeks to contact or to attract the 
attention of person(s) who may apply for employment, solicits 
applications from person(s) for employment, receives applications, and 
reviews and considers applications so as to present the appropriate 
candidates to the official(s) who make(s) the hiring decision(s) (i.e., 
pre-selection treatment of applications and applicants).
    (d) ``Solicitation methods,'' for purposes of this section, means 
the techniques by which an employer seeks to contact or to attract the 
attention of potential applicants for employment, and to solicit 
applications from person(s) for employment.
    (1) Solicitation methods may be either external or internal to the 
employer's workforce (with internal solicitation to include current and 
former employees).
    (2) Solicitation methods may be either active (where an employer 
takes positive, proactive steps to identify potential applicants and to 
get information about its job openings into the hands of such 
person(s)) or passive (where potential applicants find their way to an 
employer's job announcements).
    (i) Active solicitation methods include direct communication to 
incumbent workers in the employer's operation and to workers previously 
employed in the employer's operation and elsewhere in the industry; 
providing training to incumbent workers in the employer's organization; 
contact and outreach through collective bargaining organizations, trade 
associations and professional associations; participation in job fairs 
(including at minority-serving institutions, community/junior colleges, 
and vocational/technical colleges); use of placement services of 
colleges, universities, community/junior colleges, and business/trade 
schools; use of public and/or private employment agencies, referral 
agencies, or recruitment agencies (``headhunters'').
    (ii) Passive solicitation methods include advertising in general 
distribution publications, trade or professional journals, or special 
interest publications (e.g., student-oriented; targeted to 
underrepresented groups, including minorities, persons with 
disabilities, and residents of rural areas); America's Job Bank or 
other Internet sites advertising job vacancies; notices at the 
employer's worksite(s) and/or on the employer's Internet ``home page.''
    (e) How are ``industry-wide standards for recruitment'' to be 
identified? 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 which makes such a 
determination should be prepared to demonstrate the industry-wide 
standards in the event of an enforcement action pursuant to subpart I 
of this part. An employer's recruitment shall 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 which 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 
shall 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).
    (f) How are ``legitimate selection criteria relevant to the job 
that are normal or customary to the type of job involved'' to be 
identified? In conducting recruitment of U.S. workers (i.e., in 
soliciting applications and in pre-selection screening or considering 
of applicants), an employer shall apply selection criteria which 
satisfy all of the following three standards (i.e., paragraph (b) (1) 
through (3)). Under these standards, an employer would not apply 
spurious criteria that discriminate against U.S. worker applicants in 
favor of H-1B nonimmigrants. An employer that uses criteria which fail 
to meet these standards would be considered to have failed to conduct 
its recruitment of U.S. workers in good faith.
    (1) Legitimate criteria, meaning criteria which are legally 
cognizable and not violative of any applicable laws (e.g., employer may 
not use age, sex, race or national origin as selection criteria);.
    (2) Relevant to the job, meaning criteria which have a nexus to the 
job's duties and responsibilities; and
    (3) Normal and customary to the type of job involved, meaning 
criteria which would be necessary or appropriate based on the practices 
and expectations of the industry, rather than on the preferences of the 
particular employer.
    (g) What actions would constitute a prohibited ``discriminatory 
manner'' of recruitment? The employer shall not

[[Page 80232]]

apply otherwise-legitimate screening criteria in a manner which would 
skew the recruitment process in favor of H-1B nonimmigrants. In other 
words, the employer's application of its screening criteria shall 
provide full and fair solicitation and consideration of U.S. 
applicants. The recruitment would be considered to be conducted in a 
discriminatory manner if the employer applied its screening criteria in 
a disparate manner (whether between H-1B and U.S. workers, or between 
jobs where H-1B nonimmigrants are involved and jobs where such workers 
are not involved). The employer would also be considered to be 
recruiting in a discriminatory manner if it used screening criteria 
that are prohibited by any applicable discrimination law (e.g., sex, 
race, age, national origin). The employer that conducts recruitment in 
a discriminatory manner would be considered to have failed to conduct 
its recruitment of U.S. workers in good faith.
    (h) What constitute ``good faith steps'' in recruitment of U.S. 
workers? The employer shall perform its recruitment, as described in 
paragraphs (d) through (g) of this section, so as to offer fair 
opportunities for employment to U.S. workers, without skewing the 
recruitment process against U.S. workers or in favor of H-1B 
nonimmigrants. No specific regimen is required for solicitation methods 
seeking applicants or for pre-selection treatment screening applicants. 
The employer's recruitment process, including pre-selection treatment, 
must assure that U.S. workers are given a fair chance for consideration 
for a job, rather than being ignored or rejected through a process that 
serves the employer's preferences with respect to the make up of its 
workforce (e.g., the Department would look with disfavor on a practice 
of interviewing H-1B applicants but not U.S. applicants, or a practice 
of screening the applications of H-1B nonimmigrants differently from 
the applications of U.S. workers). The employer shall not exercise a 
preference for its incumbent nonimmigrant workers who do not yet have 
H-1B status (e.g., workers on student visas). The employer shall 
recruit in the United States, seeking U.S. worker(s), for the job(s) in 
the United States for which H-1B nonimmigrant(s) are or will be sought.
    (i) What documentation is the employer required to make or 
maintain, concerning its recruitment of U.S. workers?
    (1) The employer shall maintain documentation of the 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 (if such are 
not included in the content of the advertisements and postings). The 
documentation may be in any form, including copies of advertisements or 
proofs from the publisher, the order or confirmation from the 
publisher, an electronic or printed copy of the Internet posting, or a 
memorandum to the file.
    (2) The employer shall retain any documentation it has received or 
prepared concerning the treatment of applicants, such as copies of 
applications and/or related documents, test papers, rating forms, 
records regarding interviews, and records of job offers and applicants' 
responses. To comply with this requirement, the employer is not 
required to create any documentation it would not otherwise create.
    (3) The documentation maintained by the employer shall be made 
available to the Administrator in the event of an enforcement action 
pursuant to subpart I of this part. The documentation shall be 
maintained for the period of time specified in Sec. 655.760.
    (4) The employer's public access file maintained in accordance with 
Sec. 655.760 shall contain information summarizing the principal 
recruitment methods used and the time frame(s) in which such 
recruitment methods were used. This may be accomplished either through 
a memorandum or through copies of pertinent documents.
    (j) In addition to conducting good faith recruitment of U.S. 
workers (as described in paragraphs (a) through (h) of this section), 
the employer is required to have offered the job to any U.S. worker who 
applies and is equally or better qualified for the job than the H-1B 
nonimmigrant (see 8 U.S.C. 1182(n)(1)(G)(i)(II)); this requirement is 
enforced by the Department of Justice (see 8 U.S.C. 1182(n)(5); 20 CFR 
655.705(c)).

    19. Section 655.740 is amended by revising the title and paragraph 
(a)(2)(ii) to read as follows:


Sec. 655.740  What actions are taken on labor condition applications?

    (a) * * *
    (2) * * *
    (ii) When the Form ETA 9035 contains obvious inaccuracies. An 
obvious inaccuracy will be found if the employer files an application 
in error-- e.g., where the Administrator, Wage and Hour Division, after 
notice and opportunity for a hearing pursuant to subpart I of this 
part, has notified ETA in writing that the employer has been 
disqualified from employing H-1B nonimmigrants under section 212(n)(2) 
of the INA. Examples of other obvious inaccuracies include stating a 
wage rate below the FLSA minimum wage, submitting an LCA earlier than 
six months before the beginning date of the period of intended 
employment, identifying multiple occupations on a single LCA, 
identifying a wage which is below the prevailing wage listed on the 
LCA, or identifying a wage range where the bottom of such wage range is 
lower than the prevailing wage listed on the LCA.
* * * * *

    20. Section 655.750 is amended by revising the title and paragraph 
(b)(2) to read as follows:


Sec. 655.750  What is the validity period of the labor condition 
application?

* * * * *
    (b) * * *
    (2) Requests for withdrawals shall be in writing and shall be 
directed to the ETA service center at the following address: ETA 
Application Processing Center, P.O. Box 13640, Philadelphia PA 19101.
* * * * *

    21. Section 655.760 is amended by revising the title and paragraph 
(a)(1), adding paragraphs (a)(6), (a)(7), (a)(8), (a)(9) and (a)(10), 
and revising the first sentence of paragraph (c), to read as follows:


Sec. 655.760  What records are to be made available to the public, and 
what records are to be retained?

    (a) * * *
    (1) A copy of the completed labor condition application, Form ETA 
9035, and cover pages, Form ETA 9035CP. If the application is submitted 
by facsimile transmission, the application containing the original 
signature shall be maintained by the employer.
* * * * *
    (6) A summary of the benefits offered to U.S. workers in the same 
occupational classifications as H-1B nonimmigrants, a statement as to 
how any differentiation in benefits is made where not all employees are 
offered or receive the same benefits (such summary need not include 
proprietary information such as the costs of the benefits to the 
employer, or the details of stock options or incentive distributions), 
and/or, where applicable, a statement that some/all H-1B nonimmigrants 
are receiving ``home country'' benefits (see Sec. 655.731(c)(3));
    (7) Where the employer undergoes a change in corporate structure, a 
sworn statement by a responsible official of the

[[Page 80233]]

new employing entity that it accepts all obligations, liabilities and 
undertakings under the LCAs filed by the predecessor employing entity, 
together with a list of each affected LCA and its date of 
certification, and a description of the actual wage system and EIN of 
the new employing entity (see Sec. 655.730(e)(1)).
    (8) Where the employer utilizes the definition of ``single 
employer''in the IRC, a list of any entities included as part of the 
single employer in making the determination as to its H-1B-dependency 
status (see Sec. 655.736(d)(7));
    (9) Where the employer is H-1B-dependent and/or a willful violator, 
and indicates on the LCA(s) that only ``exempt'' H-1B nonimmigrants 
will be employed, a list of such ``exempt'' H-1B nonimmigrants (see 
Sec. 655.737(e)(1));
    (10) Where the employer is H-1B-dependent or a willful violator, a 
summary of the recruitment methods used and the time frames of 
recruitment of U.S. workers (or copies of pertinent documents showing 
this information) (see Sec. 655.739(i)(4).
* * * * *
    (c) Retention of records. Either at the employer's principal place 
of business in the U.S. or at the place of employment, the employer 
shall retain copies of the records required by this subpart for a 
period of one year beyond the last date on which any H-1B nonimmigrant 
is employed under the labor condition application or, if no 
nonimmigrants were employed under the labor condition application, one 
year from the date the labor condition application expired or was 
withdrawn.* * *
* * * * *

Subpart I--Enforcement of H-1B Labor Condition Applications

    22. Section 655.800 is revised to read as follows:


Sec. 655.800  Who will enforce the LCAs and how will they be enforced?

    (a) Authority of Administrator. Except as provided in Sec. 655.807, 
the Administrator shall perform all the Secretary's investigative and 
enforcement functions under section 212(n) of the INA (8 U.S.C. 
1182(n)) and this subpart I and subpart H of this part.
    (b) Conduct of investigations. The Administrator, either pursuant 
to a complaint or otherwise, shall conduct such investigations as may 
be appropriate and, in connection therewith, enter and inspect such 
places and such records (and make transcriptions or copies thereof), 
question such persons and gather such information as deemed necessary 
by the Administrator to determine compliance regarding the matters 
which are the subject of the investigation.
    (c) Employer cooperation/availability of records. An employer shall 
at all times cooperate in administrative and enforcement proceedings. 
An employer being investigated shall make available to the 
Administrator such records, information, persons, and places as the 
Administrator deems appropriate to copy, transcribe, question, or 
inspect. No employer subject to the provisions of section 212(n) of the 
INA and/or this subpart I or subpart H of this part shall interfere 
with any official of the Department of Labor performing an 
investigation, inspection or law enforcement function pursuant to 8 
U.S.C. 1182(n) or this subpart I or subpart H of this part. Any such 
interference shall be a violation of the labor condition application 
and this subpart I and subpart H of this part, and the Administrator 
may take such further actions as the Administrator considers 
appropriate. (Federal criminal statutes prohibit certain interference 
with a Federal officer in the performance of official duties. 18 U.S.C. 
111 and 18 U.S.C. 1114.)
    (d) Confidentiality. The Administrator shall, to the extent 
possible under existing law, protect the confidentiality of any person 
who provides information to the Department in confidence in the course 
of an investigation or otherwise under this subpart I or subpart H of 
this part.

    23. Section 655.801 is added to read as follows:


Sec. 655.801  What protection do employees have from retaliation?

    (a) No employer subject to this subpart I or subpart H of this part 
shall intimidate, threaten, restrain, coerce, blacklist, discharge or 
in any other manner discriminate against an employee (which term 
includes a former employee or an applicant for employment) because the 
employee has--
    (1) Disclosed information to the employer, or to any other person, 
that the employee reasonably believes evidences a violation of section 
212(n) of the INA or any regulation relating to section 212(n), 
including this subpart I and subpart H of this part and any pertinent 
regulations of INS or the Department of Justice; or
    (2) Cooperated or sought to cooperate in an investigation or other 
proceeding concerning the employer's compliance with the requirements 
of section 212(n) of the INA or any regulation relating to section 
212(n).
    (b) It shall be a violation of this section for any employer to 
engage in the conduct described in paragraph (a) of this section. Such 
conduct shall be subject to the penalties prescribed by section 
212(n)(2)(C)(ii) of the INA and Sec. 655.810(b)(2), i.e., a fine of up 
to $5,000, disqualification from filing petitions under section 204 or 
section 214(c) of the INA for at least two years, and such further 
administrative remedies as the Administrator considers appropriate.
    (c) Pursuant to section 212(n)(2)(v) of the INA, an H-1B 
nonimmigrant who has filed a complaint alleging that an employer has 
discriminated against the employee in violation of paragraph (d)(1) of 
this section (or Sec. 655.501(a)) may be allowed to seek other 
appropriate employment in the United States, provided the employee is 
otherwise eligible to remain and work in the United States. Such 
employment may not exceed the maximum period of stay authorized for a 
nonimmigrant classified under section 212(n) of the INA. Further 
information concerning this provision should be sought from the 
Immigration and Naturalization Service.

    24. Section 655.805 is revised to read as follows:


Sec. 655.805  What violations may the Administrator investigate?

    (a) The Administrator, through investigation, shall determine 
whether an H-1B employer has--
    (1) Filed a labor condition application with ETA which 
misrepresents a material fact (Note to paragraph (a)(1): Federal 
criminal statutes provide penalties of up to $10,000 and/or 
imprisonment of up to five years for knowing and willful submission of 
false statements to the Federal Government. 18 U.S.C. 1001; see also 18 
U.S.C. 1546);
    (2) Failed to pay wages (including benefits provided as 
compensation for services), as required under Sec. 655.731 (including 
payment of wages for certain nonproductive time);
    (3) Failed to provide working conditions as required under 
Sec. 655.732;
    (4) Filed a labor condition application for H-1B nonimmigrants 
during a strike or lockout in the course of a labor dispute in the 
occupational classification at the place of employment, as prohibited 
by Sec. 655.733;
    (5) Failed to provide notice of the filing of the labor condition 
application, as required in Sec. 655.734;
    (6) Failed to specify accurately on the labor condition application 
the number of workers sought, the occupational classification in which 
the H-1B nonimmigrant(s) will be employed, or the wage rate and 
conditions under

[[Page 80234]]

which the H-1B nonimmigrant(s) will be employed;
    (7) Displaced a U.S. worker (including displacement of a U.S. 
worker employed by a secondary employer at the worksite where an H-1B 
worker is placed), as prohibited by Sec. 655.738 (if applicable);
    (8) Failed to make the required displacement inquiry of another 
employer at a worksite where H-1B nonimmigrant(s) were placed, as set 
forth in Sec. 655.738 (if applicable);
    (9) Failed to recruit in good faith, as required by Sec. 655.739 
(if applicable);
    (10) Displaced a U.S. worker in the course of committing a willful 
violation of any of the conditions in paragraphs (a)(2) through (9) of 
this section, or willful misrepresentation of a material fact on a 
labor condition application;
    (11) Required or accepted from an H-1B nonimmigrant payment or 
remittance of the additional $500/$1,000 fee incurred in filing an H-1B 
petition with the INS, as prohibited by Sec. 655.731(c)(10)(ii);
    (12) Required or attempted to require an H-1B nonimmigrant to pay a 
penalty for ceasing employment prior to an agreed upon date, as 
prohibited by Sec. 655.731(c)(10)(i);
    (13) Discriminated against an employee for protected conduct, as 
prohibited by Sec. 655.801;
    (14) Failed to make available for public examination the 
application and necessary document(s) at the employer's principal place 
of business or worksite, as required by Sec. 655.760(a);
    (15) Failed to maintain documentation, as required by this part; 
and
    (16) Failed otherwise to comply in any other manner with the 
provisions of this subpart I or subpart H of this part.
    (b) The determination letter setting forth the investigation 
findings (see Sec. 655.815) shall specify if the violations were found 
to be substantial or willful. Penalties may be assessed and 
disqualification ordered for violation of the provisions in paragraphs 
(a)(5), (6), or (9) of this section only if the violation was found to 
be substantial or willful. The penalties may be assessed and 
disqualification ordered for violation of the provisions in paragraphs 
(a)(2) or (3) of this section only if the violation was found to be 
willful, but the Secretary may order payment of back wages (including 
benefits) due for such violation whether or not the violation was 
willful.
    (c) For purposes of this part, ``willful failure'' means a knowing 
failure or a reckless disregard with respect to whether the conduct was 
contrary to section 212(n)(1)(A)(i) or (ii) of the INA, or 
Secs. 655.731 or 655.732. See McLaughlin v. Richland Shoe Co., 486 U.S. 
128 (1988); see also Trans World Airlines v. Thurston, 469 U.S. 111 
(1985).
    (d) The provisions of this part become applicable upon the date 
that the employer's LCA is certified, pursuant to Secs. 655.740(a)(1) 
and 655.750, whether or not the employer hires any H-1B nonimmigrants 
in the occupation for the period of employment covered in the labor 
condition application. If the period of employment specified in the 
labor condition application expires or the employer withdraws the 
application in accordance with Sec. 655.750(b), the provisions of this 
part will no longer apply with respect to such application, except as 
provided in Sec. 655.750(b)(3) and (4).

    25. Section 655.806 is added to read as follows:


Sec. 655.806  Who may file a complaint and how is it processed?

    (a) Any aggrieved party, as defined in Sec. 655.715, may file a 
complaint alleging a violation described in Sec. 655.805(a). The 
procedures for filing a complaint by an aggrieved party and its 
processing by the Administrator are set forth in this section. The 
procedures for filing and processing information alleging violations 
from persons or organizations that are not aggrieved parties are set 
forth in Sec. 655.807. With regard to complaints filed by any aggrieved 
person or organization--
    (1) No particular form of complaint is required, except that the 
complaint shall be written or, if oral, shall be reduced to writing by 
the Wage and Hour Division official who receives the complaint.
    (2) The complaint shall set forth sufficient facts for the 
Administrator to determine whether there is reasonable cause to believe 
that a violation as described in Sec. 655.805 has been committed, and 
therefore that an investigation is warranted. This determination shall 
be made within 10 days of the date that the complaint is received by a 
Wage and Hour Division official. If the Administrator determines that 
the complaint fails to present reasonable cause for an investigation, 
the Administrator shall so notify the complainant, who may submit a new 
complaint, with such additional information as may be necessary. No 
hearing or appeal pursuant to this subpart shall be available where the 
Administrator determines that an investigation on a complaint is not 
warranted.
    (3) If the Administrator determines that an investigation on a 
complaint is warranted, the complaint shall be accepted for filing; an 
investigation shall be conducted and a determination issued within 30 
calendar days of the date of filing. The time for the investigation may 
be increased with the consent of the employer and the complainant, or 
if, for reasons outside of the control of the Administrator, the 
Administrator needs additional time to obtain information needed from 
the employer or other sources to determine whether a violation has 
occurred. No hearing or appeal pursuant to this subpart shall be 
available regarding the Administrator's determination that an 
investigation on a complaint is warranted.
    (4) In the event that the Administrator seeks a prevailing wage 
determination from ETA pursuant to Sec. 655.731(d), or advice as to 
prevailing working conditions from ETA pursuant to Sec. 655.732(c)(2), 
the 30-day investigation period shall be suspended from the date of the 
Administrator's request to the date of the Administrator's receipt of 
the wage determination (or, in the event that the employer challenges 
the wage determination through the Employment Service complaint system, 
to the date of the completion of such complaint process).
    (5) A complaint must be filed not later than 12 months after the 
latest date on which the alleged violation(s) were committed, which 
would be the date on which the employer allegedly failed to perform an 
action or fulfill a condition specified in the LCA, or the date on 
which the employer, through its action or inaction, allegedly 
demonstrated a misrepresentation of a material fact in the LCA. This 
jurisdictional bar does not affect the scope of the remedies which may 
be assessed by the Administrator. Where, for example, a complaint is 
timely filed, back wages may be assessed for a period prior to one year 
before the filing of a complaint.
    (6) A complaint may be submitted to any local Wage and Hour 
Division office. The addresses of such offices are found in local 
telephone directories, and on the Department's informational site on 
the Internet at http://www.dol.gov/dol/esa/public/contacts/whd/america2.htm. The office or person receiving such a complaint shall 
refer it to the office of the Wage and Hour Division administering the 
area in which the reported violation is alleged to have occurred.
    (b) When an investigation has been conducted, the Administrator 
shall, pursuant to Sec. 655.815, issue a written determination as 
described in Sec. 655.805(a).

    26. Section 655.807 is added to read as follows:

[[Page 80235]]

Sec. 655.807  How may someone who is not an ``aggrieved party'' allege 
violations, and how will those allegations be processed?

    (a) Persons who are not aggrieved parties may submit information 
concerning possible violations of the provisions described in 
Sec. 655.805(a)(1) through (4) and (a)(7) through (9). No particular 
form is required to submit the information, except that the information 
shall be submitted in writing or, if oral, shall be reduced to writing 
by the Wage and Hour Division official who receives the information. An 
optional form shall be available to be used in setting forth the 
information. The information provided shall include:
    (1) The identity of the person submitting the information and the 
person's relationship, if any, to the employer or other information 
concerning the person's basis for having knowledge of the employer's 
employment practices or its compliance with the requirements of this 
subpart I and subpart H of this part; and
    (2) A description of the possible violation, including a 
description of the facts known to the person submitting the 
information, in sufficient detail for the Secretary to determine if 
there is reasonable cause to believe that the employer has committed a 
willful violation of the provisions described in Sec. 655.805(a)(1), 
(2), (3), (4), (7), (8), or (9).
    (b) The Administrator may interview the person submitting the 
information as appropriate to obtain further information to determine 
whether the requirements of this section are met. In addition, the 
person submitting information under this section shall be informed that 
his or her identity will not be disclosed to the employer without his 
or her permission.
    (c) Information concerning possible violations must be submitted 
not later than 12 months after the latest date on which the alleged 
violation(s) were committed. The 12-month period shall be applied in 
the manner described in Sec. 655.806(a)(5).
    (d) Upon receipt of the information, the Administrator shall 
promptly review the information submitted and determine:
    (1) Does the source likely possess knowledge of the employer's 
practices or employment conditions or the employer's compliance with 
the requirements of subpart H of this part?
    (2) Has the source provided specific credible information alleging 
a violation of the requirements of the conditions described in 
Sec. 655.805(a)(1), (2), (3), (4), (7), (8), or (9)?
    (3) Does the information in support of the allegations appear to 
provide reasonable cause to believe that the employer has committed a 
violation of the provisions described in Sec. 655.805(a)(1), (2), (3), 
(4), (7), (8), or (9), and that
    (i) The alleged violation is willful?
    (ii) The employer has engaged in a pattern or practice of 
violations? or
    (iii) The employer has committed substantial violations, affecting 
multiple employees?
    (e) ``Information'' within the meaning of this section does not 
include information from an officer or employee of the Department of 
Labor unless it was obtained in the course of a lawful investigation, 
and does not include information submitted by the employer to the 
Attorney General or the Secretary in securing the employment of an H-1B 
nonimmigrant.
    (f)(1) Except as provided in paragraph (f)(2) of this section, 
where the Administrator has received information from a source other 
than an aggrieved party which satisfies all of the requirements of 
paragraphs (a) through (d) of this section, or where the Administrator 
or another agency of the Department obtains such information in a 
lawful investigation under this or any other section of the INA or any 
other Act, the Administrator (by mail or facsimile transmission) shall 
promptly notify the employer that the information has been received, 
describe the nature of the allegation in sufficient detail to permit 
the employer to respond, and request that the employer respond to the 
allegation within 10 days of its receipt of the notification. The 
Administrator shall not identify the source or information which would 
reveal the identity of the source without his or her permission.
    (2) The Administrator may dispense with notification to the 
employer of the alleged violations if the Administrator determines that 
such notification might interfere with an effort to secure the 
employer's compliance. This determination shall not be subject to 
review in any administrative proceeding and shall not be subject to 
judicial review.
    (g) After receipt of any response to the allegations provided by 
the employer, the Administrator will promptly review all of the 
information received and determine whether the allegations should be 
referred to the Secretary for a determination whether an investigation 
should be commenced by the Administrator.
    (h) If the Administrator refers the allegations to the Secretary, 
the Secretary shall make a determination as to whether to authorize an 
investigation under this section.
    (1) No investigation shall be commenced unless the Secretary (or 
the Deputy Secretary or other Acting Secretary in the absence or 
disability) personally authorizes the investigation and certifies--
    (i) That the information provided under paragraph (a) of this 
section or obtained pursuant to a lawful investigation by the 
Department of Labor provides reasonable cause to believe that the 
employer has committed a violation of the provisions described in 
Sec. 655.805(a)(1), (2), (3), (4), (7), (8), or (9);
    (ii) That there is reasonable cause to believe the alleged 
violations are willful, that the employer has engaged in a pattern or 
practice of such violations, or that the employer has committed 
substantial violations, affecting multiple employees; and
    (iii) That the other requirements of paragraphs (a) through (d) of 
this section have been met.
    (2) No hearing shall be available from a decision by the 
Administrator declining to refer allegations addressed by this section 
to the Secretary, and none shall be available from a decision by the 
Secretary certifying or declining to certify that an investigation is 
warranted.
    (i) If the Secretary issues a certification, an investigation shall 
be conducted and a determination issued within 30 days after the 
certification is received by the local Wage and Hour office undertaking 
the investigation. The time for the investigation may be increased upon 
the agreement of the employer and the Administrator or, if for reasons 
outside of the control of the Administrator, additional time is 
necessary to obtain information needed from the employer or other 
sources to determine whether a violation has occurred.
    (j) In the event that the Administrator seeks a prevailing wage 
determination from ETA pursuant to Sec. 655.731(d), or advice as to 
prevailing working conditions from ETA pursuant to Sec. 655.732(c)(2), 
the 30-day investigation period shall be suspended from the date of the 
Administrator's request to the date of the Administrator's receipt of 
the wage determination (or, in the event that the employer challenges 
the wage determination through the Employment Service complaint system, 
to the date of the completion of such complaint process).
    (k) Following the investigation, the Administrator shall issue a 
determination in accordance with to Sec. 655.815.
    (l) This section shall expire on September 30, 2003 unless section

[[Page 80236]]

212(n)(2)(G) of the INA is extended by future legislative action. 
Absent such extension, no investigation shall be certified by the 
Secretary under this section after that date; however, any 
investigation certified on or before September 30, 2003 may be 
completed.

    27. Section 655.808 is added to read as follows:


Sec. 655.808  Under what circumstances may random investigations be 
conducted?

    (a) The Administrator may conduct random investigations of an 
employer during a five-year period beginning with the date of any of 
the following findings, provided such date is on or after October 21, 
1998:
    (1) A finding by the Secretary that the employer willfully violated
    any of the provisions described in Sec. 655.805(a)(1) through (9);
    (2) A finding by the Secretary that the employer willfully 
misrepresented material fact(s) in a labor condition application filed 
pursuant to Sec. 655.730; or
    (3) A finding by the Attorney General that the employer willfully 
failed to meet the condition of section 212(n)(1)(G)(i)(II) of the INA 
(pertaining to an offer of employment to an equally or better qualified 
U.S. worker).
    (b) A finding within the meaning of this section is a final, 
unappealed decision of the agency. See Secs. 655.520(a), 655.845(c), 
and 655.855(b).
    (c) An investigation pursuant to this section may be made at any 
time the Administrator, in the exercise of discretion, considers 
appropriate, without regard to whether the Administrator has reason to 
believe a violation of the provisions of this subpart I and subpart H 
of this part has been committed. Following an investigation, the 
Administrator shall issue a determination in accordance with 
Sec. 655.815.


    28. Section 655.810 is revised to read as follows:


Sec. 655.810  What remedies may be ordered if violations are found?

    (a) Upon determining that an employer has failed to pay wages or 
provide fringe benefits as required by Sec. 655.731 and Sec. 655.732, 
the Administrator shall assess and oversee the payment of back wages or 
fringe benefits to any H-1B nonimmigrant who has not been paid or 
provided fringe benefits as required. The back wages or fringe benefits 
shall be equal to the difference between the amount that should have 
been paid and the amount that actually was paid to (or with respect to) 
such nonimmigrant(s).
    (b) Civil money penalties. The Administrator may assess civil money 
penalties for violations as follows:
    (1) An amount not to exceed $1,000 per violation for:
    (i) A violation pertaining to strike/lockout (Sec. 655.733) or 
displacement of U.S. workers (Sec. 655.738);
    (ii) A substantial violation pertaining to notification 
(Sec. 655.734), labor condition application specificity (Sec. 655.730), 
or recruitment of U.S. workers (Sec. 655.739);
    (iii) A misrepresentation of material fact on the labor condition 
application;
    (iv) An early-termination penalty paid by the employee 
(Sec. 655.731(c)(10)(i));
    (v) Payment by the employee of the additional $500/$1,000 filing 
fee (Sec. 655.731(c)(10)(ii)); or
    (vi) Violation of the requirements of the regulations in this 
subpart I and subpart H of this part or the provisions regarding public 
access (Sec. 655.760) where the violation impedes the ability of the 
Administrator to determine whether a violation of section 212(n) of the 
INA has occurred or the ability of members of the public to have 
information needed to file a complaint or information regarding alleged 
violations of section 212(n) of the INA;
    (2) An amount not to exceed $5,000 per violation for:
    (i) A willful failure pertaining to wages/working conditions 
(Secs. 655.731, 655.732), strike/lockout, notification, labor condition 
application specificity, displacement (including placement of an H-1B 
nonimmigrant at a worksite where the other/secondary employer displaces 
a U.S. worker), or recruitment;
    (ii) A willful misrepresentation of a material fact on the labor 
condition application; or
    (iii) Discrimination against an employee (Sec. 655.801(a)); or
    (3) An amount not to exceed $35,000 per violation where an employer 
(whether or not the employer is an H-1B-dependent employer or willful 
violator) displaced a U.S. worker employed by the employer in the 
period beginning 90 days before and ending 90 days after the filing of 
an H-1B petition in conjunction with any of the following violations:
    (i) A willful violation of any of the provisions described in 
Sec. 655.805(a)(2) through (9) pertaining to wages/working condition, 
strike/lockout, notification, labor condition application specificity, 
displacement, or recruitment; or
    (ii) A willful misrepresentation of a material fact on the labor 
condition application (Sec. 655.805(a)(1)).
    (c) In determining the amount of the civil money penalty to be 
assessed, the Administrator shall consider the type of violation 
committed and other relevant factors. The factors which may be 
considered include, but are not limited to, the following:
    (1) Previous history of violation, or violations, by the employer 
under the INA and this subpart I or subpart H of this part;
    (2) The number of workers affected by the violation or violations;
    (3) The gravity of the violation or violations;
    (4) Efforts made by the employer in good faith to comply with the 
provisions of 8 U.S.C. 1182(n) and this subparts H and I of this part;
    (5) The employer's explanation of the violation or violations;
    (6) The employer's commitment to future compliance; and
    (7) The extent to which the employer achieved a financial gain due 
to the violation, or the potential financial loss, potential injury or 
adverse effect with respect to other parties.
    (d) Disqualification from approval of petitions. The Administrator 
shall notify the Attorney General pursuant to Sec. 655.855 that the 
employer shall be disqualified from approval of any petitions filed by, 
or on behalf of, the employer pursuant to section 204 or section 214(c) 
of the INA for the following periods:
    (1) At least one year for violation(s) of any of the provisions 
specified in paragraph (b)(1)(i) through (iii) of this section;
    (2) At least two years for violation(s) of any of the provisions 
specified in paragraph (b)(2) of this section; or
    (3) At least three years, for violation(s) specified in paragraph 
(b)(3) of this section.
    (e) Other administrative remedies. (1) If the Administrator finds a 
violation of the provisions specified in paragraph (b)(1)(iv) or (v) of 
this section, the Administrator may issue an order requiring the 
employer to return to the employee (or pay to the U.S. Treasury if the 
employee cannot be located) any money paid by the employee in violation 
of those provisions.
    (2) If the Administrator finds a violation of the provisions 
specified in paragraph (b)(1)(i) through (iii), (b)(2), or (b)(3) of 
this section, the Administrator may impose such other administrative 
remedies as the Administrator determines to be appropriate, including 
but not limited to reinstatement of workers who were discriminated 
against in violation of Sec. 655.805(a), reinstatement of displaced 
U.S. workers, back wages to workers who have been displaced or whose 
employment has been terminated in violation of these

[[Page 80237]]

provisions, or other appropriate legal or equitable remedies.
    (f) The civil money penalties, back wages, and/or any other 
remedy(ies) determined by the Administrator to be appropriate are 
immediately due for payment or performance upon the assessment by the 
Administrator, or upon the decision by an administrative law judge 
where a hearing is timely requested, or upon the decision by the 
Secretary where review is granted. The employer shall remit the amount 
of the civil money penalty by certified check or money order made 
payable to the order of ``Wage and Hour Division, Labor.'' The 
remittance shall be delivered or mailed to the Wage and Hour Division 
office in the manner directed in the Administrator's notice of 
determination. The payment or performance of any other remedy 
prescribed by the Administrator shall follow procedures established by 
the Administrator. Distribution of back wages shall be administered in 
accordance with existing procedures established by the Administrator.
    (g) The Federal Civil Penalties Inflation Adjustment Act of 1990, 
as amended (28 U.S.C. 2461 note), requires that inflationary 
adjustments to civil money penalties in accordance with a specified 
cost-of-living formula be made, by regulation, at least every four 
years. The adjustments are to be based on changes in the Consumer Price 
Index for all Urban Consumers (CPI-U) for the U.S. City Average for All 
Items. The adjusted amounts will be published in the Federal Register. 
The amount of the penalty in a particular case will be based on the 
amount of the penalty in effect at the time the violation occurs.


    29. Section 655.815 is amended by revising the title and paragraphs 
(a) and (c)(5) to read as follows:


Sec. 655.815  What are the requirements for the Administrator's 
determination?

    (a) The Administrator's determination, issued pursuant to 
Sec. 655.806, 655.807, or 655.808, shall be served on the complainant, 
the employer, and other known interested parties by personal service or 
by certified mail at the parties' last known addresses. Where service 
by certified mail is not accepted by the party, the Administrator may 
exercise discretion to serve the determination by regular mail.
* * * * *
    (c) * * *
    (5) Where appropriate, inform the parties that, pursuant to 
Sec. 655.855, the Administrator shall notify ETA and the Attorney 
General of the occurrence of a violation by the employer.


    30. Section 655.820 is amended by revising the title and paragraph 
(a) to read as follows:


Sec. 655.820  How is a hearing requested?

    (a) Any interested party desiring review of a determination issued 
under Secs. 655.805 and 655.815, including judicial review, shall make 
a request for such an administrative hearing in writing to the Chief 
Administrative Law Judge at the address stated in the notice of 
determination. If such a request for an administrative hearing is 
timely filed, the Administrator's determination shall be inoperative 
unless and until the case is dismissed or the Administrative Law Judge 
issues an order affirming the decision.
* * * * *

    31. The title of Sec. 655.825 is revised to read as follows:


Sec. 655.825  What rules of practice apply to the hearing?

* * * * *

    32. The title of Sec. 655.830 is revised to read as follows:


Sec. 655.830  What rules apply to service of pleadings?

* * * * *

    33. The title of Sec. 655.835 is revised to read as follows:


Sec. 655.835  How will the administrative law judge conduct the 
proceeding?

* * * * *

    34. Section 655.840 is amended by revising the title and paragraph 
(c) to read as follows:


Sec. 655.840  What are the requirements for a decision and order of the 
administrative law judge?

* * * * *
    (c) In the event that the Administrator's determination of wage 
violation(s) and computation of back wages are based upon a wage 
determination obtained by the Administrator from ETA during the 
investigation (pursuant to Sec. 655.731(d)) and the administrative law 
judge determines that the Administrator's request was not warranted 
(under the standards in Sec. 655.731(d)), the administrative law judge 
shall remand the matter to the Administrator for further proceedings on 
the existence of wage violations and/or the amount(s) of back wages 
owed. If there is no such determination and remand by the 
administrative law judge, the administrative law judge shall accept as 
final and accurate the wage determination obtained from ETA or, in the 
event either the employer or another interested party filed a timely 
complaint through the Employment Service complaint system, the final 
wage determination resulting from that process. See Sec. 655.731; see 
also 20 CFR 658.420 through 658.426. Under no circumstances shall the 
administrative law judge determine the validity of the wage 
determination or require submission into evidence or disclosure of 
source data or the names of establishments contacted in developing the 
survey which is the basis for the prevailing wage determination.
* * * * *

    35. Section 655.845 is revised to read as follows:


Sec. 655.845  What rules apply to appeal of the decision of the 
administrative law judge?

    (a) The Administrator or any interested party desiring review of 
the decision and order of an administrative law judge, including 
judicial review, shall petition the Department's Administrative Review 
Board (Board) to review the decision and order. To be effective, such 
petition shall be received by the Board within 30 calendar days of the 
date of the decision and order. Copies of the petition shall be served 
on all parties and on the administrative law judge.
    (b) No particular form is prescribed for any petition for the 
Board's review permitted by this subpart. However, any such petition 
shall:
    (1) Be dated;
    (2) Be typewritten or legibly written;
    (3) Specify the issue or issues stated in the administrative law 
judge decision and order giving rise to such petition;
    (4) State the specific reason or reasons why the party petitioning 
for review believes such decision and order are in error;
    (5) Be signed by the party filing the petition or by an authorized 
representative of such party;
    (6) Include the address at which such party or authorized 
representative desires to receive further communications relating 
thereto; and
    (7) Attach copies of the administrative law judge's's decision and 
order, and any other record documents which would assist the Board in 
determining whether review is warranted.
    (c) Whenever the Board determines to review the decision and order 
of an administrative law judge, a notice of the Board's determination 
shall be served upon the administrative law judge, upon the Office of 
Administrative Law Judges, and upon all parties to the proceeding 
within 30 calendar days after the Board's receipt of the petition for 
review. If the Board determines that

[[Page 80238]]

it will review the decision and order, the order shall be inoperative 
unless and until the Board issues an order affirming the decision and 
order.
    (d) Upon receipt of the Board's notice, the Office of 
Administrative Law Judges shall within 15 calendar days forward the 
complete hearing record to the Board.
    (e) The Board's notice shall specify:
    (1) The issue or issues to be reviewed;
    (2) The form in which submissions shall be made by the parties 
(e.g., briefs);
    (3) The time within which such submissions shall be made.
    (f) All documents submitted to the Board shall be filed with the 
Administrative Review Board, Room S-4309, U.S. Department of Labor, 
Washington, DC 20210. An original and two copies of all documents shall 
be filed. Documents are not deemed filed with the Board until actually 
received by the Board. All documents, including documents filed by 
mail, shall be received by the Board either on or before the due date.
    (g) Copies of all documents filed with the Board shall be served 
upon all other parties involved in the proceeding. Service upon the 
Administrator shall be in accordance with Sec. 655.830(b).
    (h) The Board's final decision shall be issued within 180 calendar 
days from the date of the notice of intent to review. The Board's 
decision shall be served upon all parties and the administrative law 
judge.
    (i) Upon issuance of the Board's decision, the Board shall transmit 
the entire record to the Chief Administrative Law Judge for custody 
pursuant to Sec. 655.850.


    36. The title of Sec. 655.850 is revised to read as follows:


Sec. 655.850  Who has custody of the administrative record?

* * * * *

    37. Section 655.855 is revised to read as follows:


Sec. 655.855  What notice shall be given to the Employment and Training 
Administration and the Attorney General of the decision regarding 
violations?

    (a) The Administrator shall notify the Attorney General and ETA of 
the final determination of any violation requiring that the Attorney 
General not approve petitions filed by an employer. The Administrator's 
notification will address the type of violation committed by the 
employer and the appropriate statutory period for disqualification of 
the employer from approval of petitions. Violations requiring 
notification to the Attorney General are identified in Sec. 655.810(f).
    (b) The Administrator shall notify the Attorney General and ETA 
upon the earliest of the following events:
    (1) Where the Administrator determines that there is a basis for a 
finding of violation by an employer, and no timely request for hearing 
is made pursuant to Sec. 655.820; or
    (2) Where, after a hearing, the administrative law judge issues a 
decision and order finding a violation by an employer, and no timely 
petition for review is filed with the Department's Administrative 
Review Board (Board) pursuant to Sec. 655.845; or
    (3) Where a timely petition for review is filed from an 
administrative law judge's decision finding a violation and the Board 
either declines within 30 days to entertain the appeal, pursuant to 
Sec. 655.845(c), or the Board reviews and affirms the administrative 
law judge's determination; or
    (4) Where the administrative law judge finds that there was no 
violation by an employer, and the Board, upon review, issues a decision 
pursuant to Sec. 655.845, holding that a violation was committed by an 
employer.
    (c) The Attorney General, upon receipt of notification from the 
Administrator pursuant to paragraph (a) of this section, shall not 
approve petitions filed with respect to that employer under sections 
204 or 214(c) of the INA (8 U.S.C. 1154 and 1184(c)) for nonimmigrants 
to be employed by the employer, for the period of time provided by the 
Act and described in Sec. 655.810(f).
    (d) ETA, upon receipt of the Administrator's notice pursuant to 
paragraph (a) of this section, shall invalidate the employer's labor 
condition application(s) under this subpart I and subpart H of this 
part, and shall not accept for filing any application or attestation 
submitted by the employer under 20 CFR part 656 or subparts A, B, C, D, 
E, H, or I of this part, for the same calendar period as specified by 
the Attorney General.

PART 656--LABOR CERTIFICATION PROCESS FOR PERMANENT EMPLOYMENT OF 
ALIENS IN THE UNITED STATES

    1. The authority citation for Part 656 is revised to read as 
follows:

    Authority: 8 U.S.C. 1182(a)(5)(A), 1182(p)(1); 29 U.S.C. 49 et 
seq.; section 122, Pub.L. 101-649, 109 Stat. 4978.


    2. Section 656.3 is amended by removing the definition of Federal 
research agency.


    3. Section 656.40 is amended by revising paragraphs (a)(1) and (c), 
and the introductory text to paragraph (b), by redesignating paragraph 
(d) as (e), and by adding a new paragraph (d) as follows:


Sec. 656.40  Determination of prevailing wage for labor certification 
purposes.

    (a) * * *
    (1) Except as provided in paragraphs (c) and (d) of this section, 
if the job opportunity is in an occupation which is subject to a wage 
determination in the area under the Davis-Bacon Act, 40 U.S.C. 276a et 
seq., 29 CFR part 1, or the McNamara-O'Hara Service Contract Act, 41 
U.S.C. 351 et seq., 29 CFR part 4, the prevailing wage shall be at the 
rate required under the statutory determination. Certifying Officers 
shall request the assistance of the DOL Employment Standards 
Administration wage specialists if they need assistance in making this 
determination.
* * * * *
    (b) For purposes of this section, except as provided in paragraphs 
(c) and (d), ``similarly employed'' shall mean ``having substantially 
comparable jobs in the occupational category in the area of intended 
employment,'' except that, if no such workers are employed by employers 
other than the employer applicant in the area of intended employment, 
``similarly employed'' shall mean:
* * * * *
    (c) In computing the prevailing wage for a job opportunity in an 
occupational classification in an area of intended employment in the 
case of an employee of an institution of higher education, or a related 
or affiliated nonprofit entity; a nonprofit research organization; or a 
Governmental research organization, the prevailing wage level shall 
only take into account employees at such institutions and organizations 
in the area of intended employment.
    (1) The organizations listed in this paragraph (c) are defined as 
follows:
    (i) Institution of higher education is defined in section 101(a) of 
the Higher Education Act of 1965. Section 101(a), 20 U.S.C. 1001(a) 
(1999), provides that an ``institution of higher education'' is an 
educational institution in any State that--
    (A) Admits as regular students only persons having a certificate of 
graduation from a school providing secondary education, or the 
recognized equivalent of such a certificate;
    (B) Is legally authorized within such State to provide a program of 
education beyond secondary education;
    (C) Provides an educational program for which the institution 
awards a

[[Page 80239]]

bachelor's degree or provides not less than a 2-year program that is 
acceptable for full credit toward such a degree;
    (D) Is a public or other nonprofit institution; and
    (E) Is accredited by a nationally recognized accrediting agency or 
association, or if not so accredited, is an institution that has been 
granted preaccreditation status by such an agency or association that 
has been recognized by the Secretary for the granting of 
preaccreditation status, and the Secretary has determined that there is 
satisfactory assurance that the institution will meet the accreditation 
standards of such an agency or association within a reasonable time.
    (ii) Affiliated or related nonprofit entity. A nonprofit entity 
(including but not limited to hospitals and medical or research 
institutions) that is connected or associated with an institution of 
higher education, through shared ownership or control by the same board 
or federation, operated by an institution of higher education, or 
attached to an institution of higher education as a member, branch, 
cooperative, or subsidiary;
    (iii) Nonprofit research organization or Governmental research 
organization. A research organization that is either a nonprofit 
organization or entity that is primarily engaged in basic research and/
or applied research, or a U.S. Government entity whose primary mission 
is the performance or promotion of basic and/or applied research. Basic 
research is general research to gain more comprehensive knowledge or 
understanding of the subject under study, without specific applications 
in mind. Basic research is also research that advances scientific 
knowledge, but does not have specific immediate commercial objectives 
although it may be in fields of present or potential commercial 
interest. It may include research and investigation in the sciences, 
social sciences, or humanities. Applied research is research to gain 
knowledge or understanding to determine the means by which a specific, 
recognized need may be met. Applied research includes investigations 
oriented to discovering new scientific knowledge that has specific 
commercial objectives with respect to products, processes, or services. 
It may include research and investigation in the sciences, social 
sciences, or humanities.
    (2) A nonprofit organization or entity within the meaning of this 
paragraph is one that is qualified as a tax exempt organization under 
Section 501(c)(3), (c)(4) or (c)(6) of the Internal Revenue Code of 
1986, 26 U.S.C. 510(c)(3), (c)(4) or (c)(6), and has received approval 
as a tax exempt organization from the Internal Revenue Service, as it 
relates to research or educational purposes.
    (d) With respect to a professional athlete as defined in section 
212(a)(5)(A)(iii)(II) of the Immigration and Nationality Act, when the 
job opportunity is covered by professional sports league rules or 
regulations, the wage set forth in those rules or regulations shall be 
considered the prevailing wage. Section 212(a)(5)(A)(iii)(II), 8 U.S.C. 
1182(a)(5)(A)(iii)(II) (1999), defines a professional athlete as an 
individual who is employed as an athlete by--
    (1) A team that is a member of an association of six or more 
professional sports teams whose total combined revenues exceed 
$10,000,000 per year, if the association governs the conduct of its 
members and regulates the contests and exhibitions in which its member 
teams regularly engage; or
    (2) Any minor league team that is affiliated with such an 
association.
* * * * *

    Signed at Washington, DC, this 11th day of December, 2000.
Raymond Bramucci,
Assistant Secretary, Employment and Training Administration.
T. Michael Kerr,
Administrator, Wage and Hour Division, Employment Standards 
Administration.

[The following three forms will not appear in the Code of Federal 
Regulations.]

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