When H-1B Workers Lose their Jobs

 As the U.S. economy sours, more and more workers are being laid off. Over 777,000 employees were terminated in the first six months of 2001 alone. Both U.S. citizens and foreign nationals are affected. This article addresses, in a question and answer format, the immigration impact of layoffs on workers classified H-1B, the most common type of temporary work visa.

Q: What happens to the immigration status of H-1B workers when they lose their job?

A: The Immigration and Naturalization Service (INS or Service) has traditionally taken the position that H-1B status automatically ends with the termination of H-1B employment, whether the worker quits or is fired. See, e.g., Matter of Lee, 11 I. & N. Dec. 601 (Reg. Comm’r 1966) (termination of an H-1B worker’s employment constituted a failure to maintain status); letter from Thomas W. Simmons, Chief, INS Business and Trade Branch, to attorney Harry Joe, File nos. HQ 70/6.2.8, HQ 70/6.2.12 (undated), reproduced in 76 Interpreter Releases 386 (Mar. 8, 1999) (in a reduction in force, H-1B workers are out of status on the date of termination even if they are paid a severance package over a later period of time).

Q: I have heard that H-1B workers have some sort of grace period if they are terminated from their job. Is that true?

A: No, at least not so far. Contrary to what some may believe, INS regulations do not provide a grace period. And an H-1B worker who is out of status even by a day is technically ineligible for an extension of stay or change of status and is subject to removal proceedings. However, the INS can forgive the failure to maintain status in certain limited circumstances. Specifically, the INS has discretion to approve an untimely-filed request for extension or change of status if the delay was due to "extraordinary circumstances," and the worker did not otherwise violate his or her nonimmigrant status, is not in removal proceedings, and remains a bona fide nonimmigrant. 8 C.F.R. §§ 214.1(c)(4), 248.1(b). The Service has often exercised this discretion favorably to grant an extension or change when approving a petition by a new employer. However, the law didn’t permit the individual to start the new job until the petition/extension was approved.

Because the question has become critical in connection with recent legislation discussed below, the INS is now drafting regulations that could effectively extend an H-1B stay that would otherwise lapse when the employment ends. The INS has not decided how long the grace period will be. A June 19 INS memo suggests that the grace period might be 60 days. Memorandum from Michael D. Cronin, Acting INS Executive Associate Commissioner for Programs, to Michael A. Pearson, Executive Associate Commissioner, Office of Field Operations, Initial Guidance for Processing H-1B Petitions as Affected by the "American Competitiveness in the Twenty-First Century Act" (Public Law 106-313) and Related Legislation (Public Law 106-311) and (Public Law 106-396), File no. HQPGM 70/6.2.8 (June 19, 2001), reproduced in 78 Interpreter Releases 1108 (July 2, 2001). Temporary field guidance for INS offices is expected soon, with a regulation to be published in a few months.

Q: I have heard that H-1B workers have "portability" to move to a new job, meaning that they may start a new job even before the petition by the new employer is approved. Does that apply to H-1B workers who were laid off before the new employer’s petition is filed?

A: Maybe. As background, Congress enacted an H-1B portability provision last fall as part of the American Competitiveness in the Twenty-first Century Act of 2000 (AC21), Pub. L. No. 106-313, 114 Stat. 1251. See generally Stanley Mailman & Stephen Yale-Loehr, New Law Adds H-1B Numbers, Deals with Delays, N.Y.L.J., Oct. 23, 2000. Under section 105 of AC21, an H-1B nonimmigrant can switch jobs to a new H-1B employer upon the filing of a nonfrivolous petition by the new employer, as long as the nonimmigrant was lawfully admitted to the United States and has not engaged in unauthorized employment since his or her lawful admission. The new employer must file the petition before the "date of expiration of the period of stay." The portability provision is codified in Immigration and Nationality Act (INA) § 214(m), 8 U.S.C. § 1184(m). See generally Angelo Paparelli & Janet Lee, "A Moveable Feast": An Analysis of New and Old Portability under AC21 § 105, 6 Bender’s Immigr. Bull. 126 (Feb. 1, 2001).

The question here is when did the period of stay expire? The last day of the admission period as given on the entry permit (usually the end of the validity period of the H-1B petition)? Or did it end earlier, under Matter of Lee, i.e., the day the individual stopped work? The answer isn’t yet definite, as the INS has not published regulations to implement the H-1B portability provision. However, in its June 19 memo it clearly tipped its hand in favor of granting a grace period: "Congress does not appear to have limited portability benefits only to those who are working lawfully in H-1B status at the time a new employer files a new H-1B petition on their behalf." The Service indicated in the memo that it is considering a 60-day grace period that H-1B workers could use to maintain "the period of stay" and thereby invoke portability. In the meantime, the memo advises that until the INS promulgates regulations on H-1B portability, Service personnel must consult with INS headquarters on a case-by-case basis before denying benefits or starting removal proceedings on the grounds that the nonimmigrant was not lawfully working or maintaining lawful status under the requirements of the new portability provisions. Moreover, the memo notes that INS Headquarters may direct field personnel to hold certain applications in abeyance until regulations take effect.

Q: If I lay off an H-1B employee, do I have to notify the INS?

A: Yes. Current INS regulations require an employer to notify the INS of any changes in the terms and conditions of H-1B employment that may affect eligibility for H-1B status. 8 C.F.R. § 214.2(h)(11). Does that rule implicitly require a notice of the job termination? Even if it does, the employer need not ask the INS to revoke the H-1B petition. The company can merely ask the INS to note for its records that the employee no longer works for the company. The employer could state in its notice letter to INS that it opposes revocation of the H-1B petition because of the new portability law. As a practical matter, the notice will not affect the employee. Revocation of the petition is only automatic when the employer goes out of business or withdraws the petition; otherwise, the Service cannot revoke without a detailed statement of grounds and a 30-day opportunity to rebut. 8 C.F.R. § 214.2(h)(11). More to the point, to carry out the intent of Congress when it enacted AC21, the INS regulation should provide a grace period that is independent of the underlying petition.

Q: What other obligations do I have if I terminate an H-1B employee?

A: The immigration statute and INS regulations also require H-1B employers to pay ex-H-1B employees’ return transportation air fare if they have been dismissed from employment before the end of their authorized period of admission. INA § 214(c)(5)(A), 8 U.S.C. § 1184(c)(5)(A); 8 C.F.R. § 214.2(h)(4)(iii)(E). An employer can tell terminated employees that they may use the company travel account to book a single one-way ticket to their "last place of foreign residence" for travel on the last day of employment. If company records do not reflect the last foreign residence, the home country is an acceptable substitute. The return transportation obligation makes the employer "liable" only for the "reasonable costs of return transportation." The statute does not expressly impose an actual obligation to pay return transportation. Moreover, the company’s return transportation obligation is only to the H-1B employee, not to his or her spouse or children.

The company does not have to ensure that the terminated H-1B employee actually leaves the United States. If the company handles the return transportation obligation, however, it should maintain documentation to show the manner of compliance.

Q: Does the Department of Labor (DOL) have a role to play in H-1B terminations?

A: Yes. The DOL recently issued regulations to protect H-1B workers from "benching." Under these regulations, employers must pay H-1B employees their normal wages for any time spent in nonproductive status "due to the decision of the employer." 20 C.F.R. § 655.731(c)(7)(i). Moreover, according to the DOL, an employer must continue to pay the H-1B worker the "required wage" (i.e., the prevailing or actual wage, whichever is higher) until there is a "bona fide" termination of the employment relationship. 20 C.F.R. § 655.731(c)(7)(ii). The preamble to the DOL regulations (but not the actual rule) suggests that a bona fide termination occurs only when the employer notifies the INS of the termination, the H-1B petition is cancelled, and the return air fare obligation is fulfilled. 65 Fed. Reg. 80,110, 80,171 (Dec. 20, 2000) (supplementary information).

The DOL’s suggestion is not expressly required by the INA. It also flies in the face of the H-1B portability provision discussed above. Moreover, unless the employer formally withdraws the petition,, the INS may never get around to revoking it. So much more reason for the prospective INS regulation to provide the terminated H-1B employee a reasonable grace period to find a new job irrespective of the continuing validity of the prior petition.

Q: What can an employer do if they want to help H-1B employees they plan to terminate?

A: Employers may be able to help out their H-1B employees whom they plan to terminate by delaying the effective termination date. For example, if a typical severance package is six weeks at full pay, the company can put the employee in "on-call" status for those six weeks instead of paying a severance package. That may allow the worker to remain in H-1B status until the end of the six-week period. This helps the employee gain time to deal with his or her immigration issues without the company having to do anything extra for them.

Bear in mind, however, that since this period would likely be treated as non-productive time under DOL rules, the DOL’s "benching" rule would still apply to the employer. Thus, the employer still must provide full compensation and benefits, and otherwise continue to comply with the DOL and INS regulations governing H-1B employers. Moreover, this approach should be used cautiously. If the worker is not truly "on call," i.e., engaged to be waiting to perform work, an employment relationship may not truly exist, and the payment made to the worker may be considered severance pay rather than compensation. And severance pay, at least under the 1999 INS letter mentioned at the beginning of this article, marks the end of the employment. Again, the issue will become moot if the upcoming INS regulation provides a reasonable grace period.

A company does not have a duty under the immigration laws to find other visa options for the ex-employee. But it may want to maintain a good relationship with the former employee or to minimize potential damages for any possible tort or contract claims the employee might try to assert. Along those lines, an employer may want to consult with an employment lawyer to draft a general separation agreement or release of claims to cover any employment law issues that may relate to termination. The company may also want to draft a letter to give H-1B employees on, or preferably before, the last day of their employment stating that the H-1B status ends with the last day of employment and that they will be out of status as of that date, subject to change by regulation, unless they pursue other options for changing or extending visa status. The letter should also summarize how the company meets its return transportation obligation.

Q: What happens to terminated H-1B employees if they can’t find another H-1B employer or other visa status?

A: If no other visa petition is filed, the terminated H-1B alien goes out of status and is thereby theoretically deportable. Moreover, if the individual remains in the United States after the expiration date on the I-94 card or the date the INS determines the individual to be out of status, "unlawful presence" starts accruing. Under current law, a short period of unlawful presence only requires an alien to depart the United States before obtaining a new visa status and reentering. INA § 222(g), 8 U.S.C. § 1202(g). A period of unlawful presence that exceeds 180 days can result in severe immigration penalties, including being barred from returning to the United States for three or more years. See generally INA § 212(a)(9)(B), 8 U.S.C. § 1182(a)(9)(B); 5 Charles Gordon, Stanley Mailman & Stephen Yale-Loehr, Immigration Law and Procedure § 63.10 (rev. ed. 2001).

In addition to the ambiguities within the immigration law, employment and antidiscrimination laws may also apply. Even the new INS regulations that are expected in the next few months are unlikely to answer all the questions in this area. In the meantime, both employers and H-1B employees must act cautiously.

The INS has an important responsibility when it drafts the new portability regulations. Congress enacted H-1B portability last year to provide a more efficient way of using foreign workers already in the United States at a time when they were in relatively high demand. We need those provisions to operate fairly, effectively, and humanely just as much now that the labor market has eased.

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