In June of this year, Reed Smith reported that all 65,000 visas available for the H-1B visa category had been issued for fiscal year 1998. In October 1998, Congress increased the number of visas available to the H-1B category for FY 1999 and FY 2000 to 115,000, and for FY 2001 to 107,000. In FY 2002, the number of visas available to the H-1B category returns to 65,000. This increase in the number of H-1B visas has been widely reported. The new fees, obligations and penalties required in exchange for the increase, however, have not been widely discussed.

The American Competitiveness Workforce Act of 1998 (the "H-1B Extension Law") was included in the Omnibus Appropriations Act of 1998. The H-1B Extension Law insures that the increase in H-1B nonimmigrants will not replace U.S. workers. The new law is a response to the need of companies, primarily in high technology areas, for qualified help not currently available from U.S. workers. Congress decided to meet this need by increasing the quota of H-1B visas available, but only with provisions designed to preclude this need from becoming permanent. Therefore, the H-1B Extension Law was contemplated by its primary author – Senator Abraham (R. Michigan) – as a temporary bridge providing foreign high technology workers to U.S. companies only until the American workforce can take over. Thus, the H-1B Extension Law contains significant provisions requiring the payment of new fees, enhanced oversight of the H-1B process by the government, removal of economic incentives for hiring nonimmigrants, and increased penalties for violations.

Of immediate importance, the H-1B Extension Law requires a new $500 fee (over and above the current filing fee of $110.00) for all H-1B petitions filed on or after December 1, 1998 through October 1, 2001. The purpose of the new fee is to create a scholarship fund for United States workers interested in the sciences and high technology in order to reduce the future need for foreign labor. The fee is required for an initial petition, upon the first request for an extension of stay and upon the petition by another employer for concurrent or new employment. Institutions of higher education and non-profit research entities are exempt from the $500 fee.

Employers that are "H-1B dependent"(defined below) will be required to sign new attestations on the labor condition application (LCA). This obligation will become effective as soon as the Department of Labor promulgates new regulations, now anticipated to be in March of 1999. Required employers must attest that:

1. The employer did not displace any U.S. worker employed by it beginning 90 days prior to filing of the LCA and ending 90 days after the filing of any visa petition based on the LCA;
2. The employer will not place the nonimmigrant with a second employer where there are "indicia of an employment relationship" between the two employers, unless the petitioning employer has inquired and has no knowledge that the second employer has displaced a U.S. worker within the 90 day period before and after the date of the H-1B employee’s placement with the second employer;
3. The employer acting as a job contractor will not place an H-1B nonimmigrant with a second employer where a U.S. worker was or will be displaced beginning 90 days before and ending 90 days after the placement of the nonimmigrant; and
4. The employer must take good faith efforts to recruit U.S. workers using industry-wide standards, offer compensation equal to that offered to the H-1B nonimmigrant during such recruitment, and offer the job to any U.S. worker who applies and is qualified.

"Displace" is defined as laying off a U.S. worker from a job that is the equivalent job of the prospective H-1B nonimmigrant.

As stated, the attestations are required of H-1B dependent employers only. Groups of corporations are considered a single employer if they are treated as such under Section 414(b), (c), (m) or (o) of the Internal Revenue Code. An employer is H-1B dependent if:

• It has 1–25 full time equivalent employees and employs more than 7 H-1B nonimmigrants;
• It has 26–50 full time equivalent employees and employs more than 12 H-1B nonimmigrants;
• It has more than 50 full time equivalent employees and employs 15% or more H-1B nonimmigrants.

The attestations are not required if the employer is petitioning for an H-1B nonimmigrant who holds a master’s or higher degree in a field related to the intended employment or receives wages (including cash bonuses and similar compensation) of at least $60,000 annually. If the implementing regulations are not enacted before April 21, 1999, however, this exemption will not apply.

The H-1B Extension Law contains the following provisions that are designed to remove the economic incentives that employers may have when hiring H-1B nonimmigrants.

1. Employers may not require the H-1B employee to pay any penalty for early termination of employment. The employer, however, may contract for repayment of actual expenses or ask for liquidated damages.
2. Employers may not seek reimbursement for the $500 fee from the nonimmigrant.
3. Employers may not "bench" the H-1B employee, that is, to put the nonimmigrant in nonproductive status and fail to pay full-time wages.
4. Employers must offer the H-1B employee benefits (including the opportunity to participate in health, life, disability, other insurance plans, retirement and savings plans, cash bonuses and non-cash compensation, such as stock options), on the same basis as those offered to U.S. workers.

In addition, employers should keep in mind the current obligation to send the
H-1B employee back to his/her home country if the H-1B employee’s employment is terminated by the employer prior to the expiration of the H-1B employee’s authorized period of stay.

There are three levels of penalties for violations of the H-1B Extension law.

1. There is a $1,000 fine and 1-year debarment from filing H-1B petitions for a misrepresentation of material fact in a LCA; a failure to meet the attestations involving strike or lockout and layoffs; or a substantial failure to meet the attestations involving working conditions, posting or recruitment.
2. There is a $5,000 fine and a 2-year debarment for a willful violation of the LCA attestations, a misrepresentation of material fact, or the "whistleblower" provisions (see below).
3. There is a $35,000 and a 3-year debarment for a willful failure to meet a condition of, or a willful misrepresentation of fact on, the LCA where a U.S. worker is displaced within the 90 day period before and after filing of the H-1B visa petition based on that LCA.

The Secretary of the Department of Labor may investigate violations of LCAs, including those suggested by "whistleblowers." Thus, even when a complaint is not filed against the employer, the Department of Labor may investigate if it receives credible information from a source likely to have knowledge. The Department of Labor will provide the employer with notice of the allegations, unless it judges that such notice would interfere with efforts to secure compliance. The Department of Labor may investigate the employer in "whistleblower" cases for thirty (30) days. Importantly, the Department of Labor cannot initiate an investigation based on information submitted by the employer in its petition for the H-1B employee.

The employer may not threaten or punish a "whistleblower." In addition, employers who are found to have committed willful violations of the LCA are, at the discretion of the Secretary of Labor, subject to random investigations for a period of up to five (5) years.

Lastly, "whistleblowers" are given special protection by the H-1B Extension Law. Not only may their identity be withheld by the Department of Labor, but the source’s identity may not be disclosed under the Freedom of Information Act.

The foregoing is a brief summary of a complicated piece of legislation with ambiguities and questions that may not be answered until the implementing regulations are enacted. However, there are certain steps employers using H-1B nonimmigrant employees should take.

1. Keep accurate documentation of all steps taken in the H-1B process.
2. Review employment contracts with H-1B employees to make sure there are no penalty provisions for early termination.
3. Review the terms and conditions of existing H-1B employees to insure that they are in compliance with the H-1B Extension Law. The provisions on equal benefits and "non-benching", for example, are effective immediately and apply to existing petitions.

Taking these steps could eliminate considerable difficulties under the new H-1B Extension Law.