Q. Recently we have had a number of folks from Canada and Europe requesting us to put them in volunteer positions. Somewhere I have heard that it is not permissible and that the person wishing to volunteer is in jeopardy of losing their right to work in the USA simply by performing volunteer services while on a work visa. I've been trying to research this on the internet but cannot find any helpful sites. Can you offer any advice and also any websites I can refer to for future reference?
A. Employers in Massachusetts, and especially for profit business entities, should be careful not to violate state and/or federal payment of wage, minimum wage, employment tax, workers compensation, benefits and other statutes. Independent of the exposure a foreign national may have for improperly "working" in the U.S. without a proper work visa, the employer may face significant exposure for nonpayment of wages and failure to meet related requirements by having volunteers performing work for them. Both Massachusetts and federal law are strict regarding volunteers. Only employers that have established training programs meeting detailed criteria may take advantage of having unpaid personnel legitimately receiving such training in their workforce. If the criteria are not met, the employer and certain responsible executives could be sued or prosecuted and possibly held liable for fines, back wages, liquidated damages, attorneys fees and perhaps other damages. The federal Fair Labor Standards Act, 20 USC Section 203(g) is the principal federal statute in the area, though not the only source of potential liability.
Q. We are hiring an employee from our home office in Germany and he will be here for 18 months. I think he should pay all US taxes while here in order to get credit toward his German pension. Am I correct, will he have to pay additional taxes once he returns for Germany?
A. Whether the individual will have to pay U.S. Social Security and Medicare taxes in order to get credits under the German Social Security system will depend on whether he remains covered under the German Social Security system during his 18 months in the U.S. If he is covered during this time, he may be exempt from U.S. Social Security and Medicare taxes under the U.S.-German Totalization Agreement, yet still obtain credits under the German Social Security system. This depends, in part, on whether the employer is a German employer (or affiliated with a German employer).
While certain former U.S. citizens and former long-term residents may continue to be subject to U.S. taxes for 10 years following expatriation under Internal Revenue Code Section 877, in the case of foreign nationals, that section only applies to individuals who were "lawful permanent residents" during any part of at least 8 of the 15 tax years ending with the tax year during which expatriation occurs. Furthermore, Section 877 only applies to individuals who meet certain income and net worth requirements (average annual income tax for the five years prior to expatriation is $124,000 (indexed for inflation), and net worth at time of expatriation is in excess of $2 million). The application of Section 877 will also depend on whether the individual claimed foreign residency under the U.S.-German tax treaty while in the U.S.
Q. One employee who is currently under OPT will return to her/his country for the gap between the end of OPT and beginning of H-1B (June through September). My company would like to continue the employment (via a separate employment agreement) while he/she is in her home country. Since Form I-9 is not required for a foreign employee working in a foreign country, does that mean my company doesn't have to withhold federal/state income tax, Medicare, or social security taxes? How about health insurance premium?
A. This question provides very little detail, but generally, remuneration paid to a nonresident alien employee for personal services rendered outside the U.S. is not considered U.S. source earned income and is not subject to U.S. taxation.
Q) We have a few 5 H1-B visa employees that started work in January of 2008. They have not performed to our standards. We have asked them to re-work some of their work that was poor quality. At one point, we asked that they come in over the weekend to meet a deadline and re-work documents that needed to be submitted to our client ASAP. The employees did not show up for work as we requested. We would like to suspend without pay for insubordination for a week, due to them not coming into work and finishing the project. We would also like to terminate at least 2 for very poor work quality, not up to the standards listed on their resume. What can/should we do if we want to suspend w/out pay and terminate employment?
A. The H-1B process is highly regulated by the U.S. Department of Labor (DOL) and the employer, by filing a Labor Condition Application with the DOL and an H-1B Petition with the U.S. Citizenship and Immigration Service (USCIS) agrees to pay the H-1B employee the full wage during the entire term of work specified by the employer on the petition, unless the employer terminates the H-1B case by properly terminating the employee under state law and withdrawing the petition from USCIS. Usually a term of 2- 3 years is stated on the H-1B petition by the employer, so the obligation can linger after the employee leaves.
If an H-1B employee is terminated before the end of the term of work specified on the H-1B petition, the employer is responsible for paying the reasonable costs of return transportation home. This requirement has not been clarified by the USCIS, and employers have been directed to state courts for answers. If an employee is terminated earlier, even for cause, the employer should provide the employee with a notice offering to pay the return transportation home and request that the employee complete the form noting whether they request to receive a plane ticket or other form of compensation for the travel home, or instead decline this offer. Various other options exist for fulfilling this requirement. The employer should be sure to retain evidence that it complied with the return transportation home rule as well as proof of proper termination described above.
Indeed, the DOL takes the position that failure to comply with these three actions will permit an employee to continue to claim wages until the end date of the petition and subject the employer to penalties even if the employee is no longer working! It is important to note, that these rules apply only when the employer is terminating the employee, although notice to USCIS is always required when the employee stops working vountarily.
Even if the employer does not wish to terminate the employee, it must continue to pay the employee the full wages under the H-1B petition. Failure to work at the required level or to work on week-ends or similar issues does not relieve the employer from paying the full required wage stated on the Labor Condition Application and the H-1B petition filed with the DOL and the USCIS. Indeed, requiring the employee to work extra hours despite the reason, may violate other DOL rules.
All in all, once an employer signs off on the H-1B case, it promises to pay the employee in any event until “proper termination.” The employer must pay the employee even during “non-productive work” periods or “benching.” The only exceptions which relieve the employer of paying the employee are when the reasons for not working are attributed to the employee, such as a requested leave of absence or hospitalization. Even these exceptions are narrowed by the employer’s policy on these issues with its overall workforce.
Q. While conducting an interview with a foreign candidate (egg. a student in his final year of study), is it legal to ask him what visa he is on? The hiring decision will not be affected by his visa status, as the company is willing to sponsor a H1B visa for the right candidate. However, it is helpful to know if sponsorship is required for the candidate during the interview process.
A. An employer is not permitted to pre-screen a prospective candidate for immigration status. However, if the individual brings this to the attention of the employer during the interview process, then it is entirely permissible to request information about the need for a work visa or other form of employment authorization since you have been put on notice that the individual may not be authorized to work without the employer filing a petition or some other action which needs to be taken. It is prudent, if you use an employment application, to ask the following questions on the application for all job candidates:
1. Are you currently authorized to work in the U.S?
2. If your response is no, will you require sponsorship from our company or other action to obtain work authorization?
Please provide details below:
If the answer to question no. 1 is yes, no further inquiry may be made. If the answer is no, you may inquire as to the applicant’s current immigration status and the need for employer sponsorship. It would be important to have the prospective employee’s immigration status reviewed by immigration counsel prior to making an offer since even if the employer wants to assist the employee, the legal process may not be workable to achieve the desired goal. Also, the individual may not fully understand or perhaps not disclose all facts needed for a full assessment.
Please see the response to question no. 3 below which provides further details in the context of an employee who has already been hired who requires immigration sponsorship.
Q. I own a small (30 workers) business & recently hired a graduate student with an OPT, and told to him I would sponsor him for an H-1B visa. However I was not aware of the high cost of the process. Can I deduct the cost from my taxes, could I lower his salary, or perhaps hold him responsible for any of the costs?
A. As noted above, an employer who is alerted to the fact that a candidate may require immigration sponsorship through disclosure by the individual, should first seek legal counsel prior to extending the offer. Many employers have not experienced the complexities of hiring individuals who need immigration assistance and should obtain this in advance of hiring. Please note the responses to this employer’s questions:
• Can I deduct the cost from my taxes?
The U.S. Department of Labor (DOL) takes the position that costs associated with filing for an H-1B visa are the employer’s business expenses since it views the process as entirely the employer’s legal responsibility. Given this position, I would imagine that it would constitute a tax deduction; however, I would consult with my tax advisor to verify this.
• Could I lower his salary?
The Department of Labor requires that the employer pay the individual the “required wage rate,” which is determined by the DOL as either the higher of the “actual wage” paid on the jobsite for the job or the prevailing wage set by the DOL.
Any deduction from the required wage rate may be deemed illegal by the DOL, if it would reduce the “required wage rate” paid to the employee and potentially subject the employer to a claim for back wages or other sanctions for noncompliance.
Perhaps in certain cases, an employer who was paying the employee in excess of the “required wage rate” could reduce the offered salary, but it could not be deducted by the employer from the H-1B employee’s paycheck since only certain deductions are permissible under DOL regulations.
• Could I perhaps hold him responsible for any of the costs?
As noted above, the DOL considers the attorneys’ legal and related costs necessary for obtaining an H-1B visa for an employee as the employer’s business expenses which cannot be shifted to the employee. The U.S. Citizenship and Immigration Service (USCIS) specifically prohibits the employee from paying the basic filing fees ($2320). If premium process (an additional $1,000 filing fee) is utilized to get a quicker decision, it appears the USCIS will not prohibit this, but it not entirely clear what the DOL thinks on this. However, the DOL has stated that the employee can pay certain costs associated with the employee’s specific situation, such as costs for educational evaluations of foreign education or translation costs. In addition, the DOL has stated that certain aspects of the legal fees paid by the employer to its counsel which may be attributed entirely to the employee may be paid by the employee. This presents some complexity in calculation and is probably not worth the effort.
The employee may also retain its own counsel, and may pay legal fees to a second attorney hired by the employee to represent him/her independently from the employer’s counsel. Given that all of the paperwork for both the DOL and USCIS filings is signed by the employer and most of the information relates to the employer, it would be extremely hard to pro-rate what amount could be attributed to the employee. For this reason, it is advisable for the employer to look to hiring and paying the attorney to represent it to achieve full compliance and to avoid fines and other sanctions.
Perhaps, most importantly, there is an annual lottery for H-1B numbers which requires the case to be filed on April 1, 2009. Last year only about 1 in 3 were selected, unless they had a U.S. Master’s degree or above. Then the chance was better. In any case, the practical training only lasts 12 months and you would have to terminate the employee if they did not get an H-1B in the lottery. Moreover, the effective date of the H-1B would be 10/1/09, so if their OPT expired earlier, there may be issues with them remaining in the U.S. This is a complex area.