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Rami Fakhoury on IT Immigration

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  1. The Fight Book: Appendix IV

    Rami Fakhory and Mark Levey
    Copyright @2010 Fakhoury Law Group/Rami Fakhoury
    Appendix V
    http://www.dol.gov/dol/allcfr/title_20/Part_655/20CFR655.736.htm
    CFR Code of Federal Regulations Pertaining to U.S. Department of Labor
    Title 20  Employees' Benefits
    Chapter V Employment and Training Administration, Department of Labor
    Part 655 Temporary Employment of Aliens in the United States
    Subpart H  Labor Condition Applications and Requirements for Employers Using Nonimmigrants on H-1B Visas in Specialty Occupations and as Fashion Models
     



    20 CFR 655.736 - What are H-1B-dependent employers and willful violators?

    Section Number: 655.736
    Section Name: 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 655.737). These obligations require that such employers not displace U.S. workers from jobs (as described in 655.738) and that such employers recruit U.S. workers before hiring H-1B nonimmigrants (as described in 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 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 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.
    (iii) 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 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 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 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 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 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 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 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 655.731(b)(1)).
    (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 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 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 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 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 or 9035E (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 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 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 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 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 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 nondisplacement of U.S. workers and recruitment of U.S. workers (as described in 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 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.




     




     [65 FR 80223, Dec. 20, 2000 as amended at 66 FR 1375, Jan. 8, 2001; 66 FR 63297, Dec. 5, 2001]
  2. The Fight Book: Appendix III

    Rami Fakhoury and Mark Levey
    Copyright @2010 Fakhoury Law Group/ Rami Fakhoury
    Appendix III
    U.S. Department of Labor
    Employment Standards Administration
    Wage and Hour Division
    (Revised July 2008)
     
    Fact Sheet #62C: Who is an H-1B-dependent employer?
     
    This fact sheet provides general information concerning H-1B-dependent employers under the H-1B program.
    Special attestations applicable to H-1B-dependent and willful violator employers sunset on October 1, 2003, but were restored effective March 8, 2005 by the H-1B Visa Reform Act of 2004.
     
    An employer is considered H-1B-dependent if it has:
    o 25 or fewer full-time equivalent employees and at least eight H-1B nonimmigrant workers; or
    o 26 - 50 full-time equivalent employees and at least 13 H-1B nonimmigrant workers; or
    o 51 or more full-time equivalent employees of whom15 percent or more are H-1B
    nonimmigrant workers.
     
    When must an employer determine dependency?
    The employer must determine dependency when filing either:
    o A Labor Condition Application (LCA); or
    o A Petition for a Nonimmigrant Worker (Forms I-129/I-129W) based on an LCA; or
    o A request for an extension of  H-1B status for a nonimmigrant worker based on an LCA.
    Employers with readily apparent status concerning H-1B -dependency need not calculate that status.
     
    Is there a simple calculation to determine dependency?
    Yes. An employer whose dependency is not readily apparent or is borderline may use the "snap-shot" test. The snap-shot test requires a comparison of the total number of all H-1B workers to the number of the total workforce (including H-1B workers). If a small employer's snap-shot calculation shows that the employer is dependent, the employer employer must then fully calculate its dependency status. If a large employer's calculation exceeds 15% of its workforce, that employer must fully calculate its dependency status.
     
    If an employer must fully calculate dependency, how is this performed?
    This full calculation must take into consideration the total number of H-1B workers (a "head count" of both full-time and part-time workers) and the employer's total work force in the United States (including both U.S. workers and H-1B workers) and must be measured according to full-time equivalent employees.
     
    How should an employer using the Internal Revenue Code (IRC) "single employer" definition determine dependency?
     
    An IRC "single employer" which concludes that it is not H-1B-dependent shall perform the snap- shot test (and/or full calculation if appropriate) described above. The Wage and Hour Division, however, will not assess penalties for employers who do not perform the snap-shot test where all of the entities that make up the single employer have readily apparent non-dependent status. Note that this enforcement policy will not affect the right
    of an aggrieved party to challenge the employer's failure to perform the snap-shot test.
     
    U.S. Department of Homeland Security
    Citizenship and Immigration Services
     
    425 I Street NW
    ULLICO, 3rd Floor
    Washington, D.C. 20536
     
    October 23, 2003
     
    Ms. Lynn Shotwell
    American Council on International Personnel, Inc.
    515 Madison Avenue, 6th Floor
    New York, NY 10022
     
    Dear Ms. Shotwell:
    We regret the delay in responding to your July 12 letter regarding the requirements for filing an amended petition when an H-1B employee transfers to a new location not included on the original Form I-129, but which is covered by a labor condition application (LCA) that was in place prior to the employer's move.
     Based on the information you provided, an amended Form I-129 petition would not be required simply on the basis of the geographic move. As long as the LCA has been filed and certified for the new employment location, the appropriate worksite posting has taken place, and other wage and hour obligations are met, no amended petition would be required regardless of when the LCA was filed and certified, as long as the certification took place before the employee was moved. Please note, however, that if any other change takes place that constitutes a material change in the terms and conditions of employment and that affects the beneficiary's eligibility for H-1B classification, an amended petition would be required.
     Please also note, as discussed in legacy INS correspondence, that the U.S. Citizenship and Immigration Services (USCIS) does not encourage "speculative employment", and the better practice would be for employers to include alternative locations in itineraries filed with the original Form I-129 petition if they are planning to move employees. Note that the itineraries must be reflected in a multiple location LCA or multiple LCAs that have already been appropriately posted and certified. The USCIS must be apprised of the move when the subsequent LCA is filed with a request for extension. Additionally, in all instances, foreign nationals who change their place of residence must comply with immigration regulations pertaining to filing changes of address on Form AR-11 and special registration, if applicable.
     Please be aware that the USCIS will explore the issue of the need to file amended H-1B petitions in the context of regulations implementing the American Competitiveness in the Twenty-First Century Act (AC21), and related legislation. Our position on this issue, therefore, is subject to change.
     We hope that this information has been useful to you. If you have further questions concerning this matter, please do not hesitate to contact this office at the above address.
     
    Sincerely,
    Efren Hernandez III
    Director, Business and Trade Branch
  3. The Fight Book: Appendix II

    Rami Fakhoury and Mark Levey
    Copyright @2010 Fakhoury Law Group/ Rami Fakhoury
    APPENDIX II:
    House Comprehensive Immigration reform Bill, H.R. 4321, Would Impose Severe H-1B Restrictions
    On December 15, 2009, Congressman Luis V. Gutierrez (D-IL) introduced legislation (HR 4321), the Comprehensive Immigration Reform for America's Security and Prosperity Act of 2009 (CIR ASAP). So far, this 700-page bill has failed to find enthusiastic support of the tech industry and it contains provisions that will simply enrage H-1B critics and the IT Consulting industry, alike, once they become better understood. One clause that may win industry support calls for the release of all the H-1B visas that went unused from 1992 to 2008 -- a total of about 309,000. 
    But this House Bill also incorporates parts of other bills that impose restrictions on H-1B use and call for tougher enforcement that mirror the Senate Durbin-Grassley proposals.  The specific enforcement provisions include[1]:
    SEC. 531. MODIFICATION OF APPLICATION REQUIREMENTS.

    Raises the prevailing wage to the median wage for skill level 2 in the occupational classification found in the most recent Occupational Employment Statistics survey (Sec. 531(a)(A)(i)(III)); 
    Require internet posting of LCAs  for 30 days (Sec. 531(b));
    Non-displacement attestations required for H-1B dependent employers would be increased to 180 days prior to filing an LCA from the present 90-day period (Sec. 531(d)(I)(A)(i))
    Requirement for a waiver from the U.S. Secretary of Labor for H-1B outsourcing. Sec. 531"(e) Requirement for Waiver- Subparagraph (F) of such section 212(n)(1) is amended to read as follows:

    `(F) The employer shall not place, outsource, lease, or otherwise contract for the services or placement of H-1B nonimmigrants with another employer unless the employer of the alien has been granted a waiver under paragraph (2)(E).'."

    SEC. 532. NEW APPLICATION REQUIREMENTS.
    1)Bans the alleged practice of employers recruiting exclusively for H-1B workers, and giving preference for H-1B in recruitment, 2) bans additional LCAs for firms of larger than 50 employees with staffs that are more than 50% H-1B or L-1, and 3) allows the USDOL to request IRS records of employers:
    " `(H)(i) The employer has not advertised any available position specified in the application in an advertisement that states or indicates that--
    `(I) such position is only available to an individual who is or will be an H-1B nonimmigrant; or
    `(II) an individual who is or will be an H-1B nonimmigrant shall receive priority or a preference in the hiring process for such position.
    `(ii) The employer has not solely recruited individuals who are or who will be H-1B nonimmigrants to fill such position.[NOTE: This language appears to ban recruitment advertising for H-1B workers without regard to whether the relevant recruitment  is conducted inside the U.S. or conducted abroad.]
    `(I) If the employer employs 50 or more employees in the United States, the sum of the number of such employees who are H-1B nonimmigrants plus the number of such employees who are nonimmigrants described in section 101(a)(15)(L) may not exceed 50 percent of the total number of employees.
    `(J) If the employer, in such previous period as the Secretary shall specify, employed 1 or more H-1B nonimmigrants, the employer shall submit to the Secretary the Internal Revenue Service Form W-2 Wage and Tax Statement filed by the employer with respect to the H-1B nonimmigrants for such period.'."
     
    SEC. 533. APPLICATION REVIEW REQUIREMENTS.
     Significantly broadens the authority of the USDOL to review LCAs for "indicators of fraud or misrepresentation of material fact."  Existing statute limits that agency's review to "only for completeness", reserving initial investigatory power to DHS.
    (a) Technical Amendment- Section 212(n)(1) of the Immigration and Nationality Act (8 U.S.C. 1182(n)(1)), as amended by section 102, is further amended in the undesignated paragraph at the end, by striking `The employer' and inserting the following:
    `(K) The employer.'.
    (b) Application Review Requirements- Subparagraph (K) of such section 212(n)(1), as designated by subsection (a), is amended--
    (1) by inserting `and through the Department of Labor's website, without charge.' after `D.C.';
    (2) by striking `only for completeness' and inserting `for completeness and clear indicators of fraud or misrepresentation of material fact,';
    (3) by striking `or obviously inaccurate' and inserting `, presents clear indicators of fraud or misrepresentation of material fact, or is obviously inaccurate';
    (4) by striking `within 7 days of' and inserting `not later than 14 days after'; and
    (5) by adding at the end the following: `If the Secretary's review of an application identifies clear indicators of fraud or misrepresentation of material fact, the Secretary may conduct an investigation and hearing in accordance with paragraph (2).'.
    Subchapter B--Investigation and Disposition of Complaints Against H-1B
    SEC. 541. GENERAL MODIFICATION OF PROCEDURES FOR INVESTIGATION AND DISPOSITION.
     
    1) Extends the time frame for USDOL investigations of LCA-related matters from one to two years from date of receipt; 2) authorizes USDOL to conduct site surveys and annual compliance audits of H-1B employers; mandates annual USDOL audits for larger firms with more than 15 percent H-1B employment. 
     
    Subparagraph (A) of section 212(n)(2) of the Immigration and Nationality Act (8 U.S.C. 1182(n)(2)) is amended--
    (1) by striking `(A) Subject' and inserting `(A)(i) Subject';
    (2) by striking `12 months' and inserting `24 months';
    (3) by striking the last sentence; and
    (4) by adding at the end the following:
    `(ii)(I) Upon the receipt of such a complaint, the Secretary may initiate an investigation to determine if such a failure or misrepresentation has occurred.
    `(II) The Secretary may conduct surveys of the degree to which employers comply with the requirements of this subsection and may conduct annual compliance audits of employers that employ H-1B nonimmigrants.
    `(III) The Secretary shall--
    `(aa) conduct annual compliance audits of not less than 1 percent of the employers that employ H-1B nonimmigrants during the applicable calendar year;
    `(bb) conduct annual compliance audits of each employer with more than 100 employees who work in the United States if more than 15 percent of such employees are H-1B nonimmigrants; and
    `(cc) make available to the public an executive summary or report describing the general findings of the audits carried out pursuant to this subclause.'.
     
    SEC. 542. INVESTIGATION, WORKING CONDITIONS, AND PENALTIES.
     Doubles fines and penalties for willful violation of LCA requirements. Imposes an unspecified penalty for "benching" H-1B workers beyond liquidated damages.   
    Subparagraph (C) of section 212(n)(2) of the Immigration and Nationality Act (8 U.S.C. 1182(n)(2)) is amended--
    (1) in clause (i)--
    (A) in the matter preceding subclause (I)--
    (i) by striking `a condition of paragraph (1)(B), (1)(E), or (1)(F)' and inserting `a condition under subparagraph (A), (B), (C)(i), (E), (F), (G)(i)(I), (H), (I), or (J) of paragraph (1)'; and
    (ii) by striking `(1)(C)' and inserting `(1)(C)(ii)'; and
    (B) in subclause (I)--
    (i) by striking `$1,000' and inserting `$2,000'; and
    (ii) by striking `and' at the end;
    (C) in subclause (II), by striking the period at the end and inserting a semicolon and `and';
    (D) by adding at the end the following:
    `(III) an employer that violates such subparagraph (A) shall be liable to the employees harmed by such violations for lost wages and benefits.'; and
    (2) in clause (ii)--
    (A) in subclause (I)--
    (i) by striking `may' and inserting `shall'; and
    (ii) by striking `$5,000' and inserting `$10,000'; and
    (B) in subclause (II), by striking the period at the end and inserting a semicolon and `and';
    (C) by adding at the end the following:
    `(III) an employer that violates such subparagraph (A) shall be liable to the employees harmed by such violations for lost wages and benefits.'; and
    (3) in clause (iii)--
    (A) in the matter preceding subclause (I), by striking `90 days' both places it appears and inserting `180 days';
    (B) in subclause (I)--
    (i) by striking `may' and inserting `shall'; and
    (ii) by striking `and' at the end;
    (C) in subclause (II), by striking the period at the end and inserting a semicolon and `and'; and
    (D) by adding at the end the following:
    `(III) an employer that violates subparagraph (A) of such paragraph shall be liable to the employees harmed by such violations for lost wages and benefits.';
    (4) in clause (iv)--
    (A) by inserting `to take, fail to take, or threaten to take or fail to take, a personnel action, or' before `to intimidate';
    (B) by inserting `(I)' after `(iv)'; and
    (C) by adding at the end the following:
    `(II) An employer that violates this clause shall be liable to the employees harmed by such violation for lost wages and benefits.'; and
    (5) in clause (vi)--
    (A) by amending subclause (I) to read as follows:
    `(I) It is a violation of this clause for an employer who has filed an application under this subsection--
    `(aa) to require 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 (the Secretary shall determine whether a required payment is a penalty, and not liquidated damages, pursuant to relevant State law); and
    `(bb) to fail to offer to an H-1B nonimmigrant, during the nonimmigrant's period of authorized employment, on the same basis, and in accordance with the same criteria, as the employer offers to United States workers, benefits and eligibility for benefits, including--
    `(AA) the opportunity to participate in health, life, disability, and other insurance plans;
    `(BB) the opportunity to participate in retirement and savings plans; and
    `(CC) cash bonuses and noncash compensation, such as stock options (whether or not based on performance).'; and
    (B) in subclause (III), by striking `$1,000' and inserting `$2,000'.
     
    SEC. 543. WAIVER REQUIREMENTS.
     Imposes a bar upon H-1B worker outsourcing similar to that imposed in 2005 upon L-1B workers placed at client sites.   Also, for the first time, imposes a regulatory requirement that work of H-1B employees placed at client sites be "controlled and supervised" by the petitioner, instead of "supervised, or otherwise controlled",  as under current regulations governing H-1B placement agencies.   A waiver is offered if the petitioner can show that there have been no layoffs and now will result for six months prior and after the placement of the H-1B worker at the client site.
     
    (a) In General- Subparagraph (E) of section 212(n)(2) of the Immigration and Nationality Act (8 U.S.C. 1182(n)(2)) is amended to read as follows:
    `(E)(i) The Secretary of Labor may waive the prohibition in paragraph (1)(F) if the Secretary determines that the employer seeking the waiver has established that--
    `(I) the employer with whom the H-1B nonimmigrant would be placed has not displaced, and does not intend to displace, a United States worker employed by the employer within the period beginning 180 days before and ending 180 days after the date of the placement of the nonimmigrant with the employer;
    `(II) the H-1B nonimmigrant will not be controlled and supervised principally by the employer with whom the H-1B nonimmigrant would be placed; and
    `(III) the placement of the H-1B nonimmigrant is not essentially an arrangement to provide labor for hire for the employer with whom the H-1B nonimmigrant will be placed.
    `(ii) The Secretary shall grant or deny a waiver under this subparagraph not later than 7 days after the Secretary receives the application for such waiver.'.
    (b) Requirement for Rules-
    (1) RULES FOR WAIVERS- The Secretary of Labor shall promulgate rules, after notice and a period for comment, for an employer to apply for a waiver under subparagraph (E) of section 212(n)(2) of such Act, as amended by subsection (a).
    (2) REQUIREMENT FOR PUBLICATION- The Secretary of Labor shall submit to Congress and publish in the Federal Register and other appropriate media a notice of the date that rules required by paragraph (1) are published.
     
    SEC. 544. INITIATION OF INVESTIGATIONS.
    Permits USDOL to initiate its own investigations and administrative sanction of suspected violations related to LCA requirements during the previous two years.  Allows "investigations and efforts to secure compliance by the employer with this subsection" without providing notice to the party suspected of violation.   Exempts such determinations made by the Secretary from judicial review.
    Subparagraph (G) of section 212(n)(2) of the Immigration and Nationality Act (8 U.S.C. 1182(n)(2)) is amended--
    (1) in clause (i), by striking `if the Secretary' and all that follows and inserting `with regard to the employer's compliance with the requirements of this subsection.';
    (2) in clause (ii), by striking `and whose identity' and all that follows through `failure or failures.' and inserting `the Secretary of Labor may conduct an investigation into the employer's compliance with the requirements of this subsection.';
    (3) in clause (iii), by striking the last sentence;
    (4) by striking clauses (iv) and (v);
    (5) by redesignating clauses (vi), (vii), and (viii) as clauses (iv), (v), and (vi), respectively;
    (6) in clause (iv), as so redesignated, by striking `meet a condition described in clause (ii), unless the Secretary of Labor receives the information not later than 12 months' and inserting `comply with the requirements under this subsection, unless the Secretary of Labor receives the information not later than 24 months';
    (7) by amending clause (v), as so redesignated, to read as follows:
    `(v) The Secretary of Labor shall provide notice to an employer of the intent to conduct an investigation. The notice shall be provided in such a manner, and shall contain sufficient detail, to permit the employer to respond to the allegations before an investigation is commenced. The Secretary is not required to comply with this clause if the Secretary determines that such compliance would interfere with an effort by the Secretary to investigate or secure compliance by the employer with the requirements of this subsection. A determination by the Secretary under this clause shall not be subject to judicial review.';
    (8) in clause (vi), as so redesignated, by striking `An investigation' and all that follows through `the determination.' and inserting `If the Secretary of Labor, after an investigation under clause (i) or (ii), determines that a reasonable basis exists to make a finding that the employer has failed to comply with the requirements under this subsection, the Secretary shall provide interested parties with notice of such determination and an opportunity for a hearing in accordance with section 556 of title 5, United States Code, not later than 120 days after the date of such determination.'; and
    (9) by adding at the end the following:
    `(vii) If the Secretary of Labor, after a hearing, finds a reasonable basis to believe that the employer has violated the requirements under this subsection, the Secretary shall impose a penalty under subparagraph (C).'.
     
    SEC. 545. INFORMATION SHARING.
     Permits USDOL to launch investigations based upon information provided by USCIS and to share the contents of I-129 petitions and any subsequent FDNS audits or investigations.
     Subparagraph (H) of section 212(n)(2) of the Immigration and Nationality Act (8 U.S.C. 1182(n)(2)) is amended to read as follows:
    `(H) The Director of United States Citizenship and Immigration Services shall provide the Secretary of Labor with any information contained in the materials submitted by employers of H-1B nonimmigrants as part of the adjudication process that indicates that the employer is not complying with visa program requirements for H-1B nonimmigrants. The Secretary may initiate and conduct an investigation and hearing under this paragraph after receiving information of noncompliance under this subparagraph.'.
     
    SEC. 546. CONFORMING AMENDMENT.
     
    Subparagraph (F) of section 212(n)(2) of the Immigration and Nationality Act (8 U.S.C. 1182) is amended by striking `The preceding sentence shall apply to an employer regardless of whether or not the employer is an H-1B-dependent employer.'.
     
    Subchapter C--Other H-1B Provisions
    SEC. 551. POSTING AVAILABLE H-1B POSITIONS THROUGH THE DEPARTMENT OF LABOR.
     
    Effectively puts in place a national advertising requirement for all H-1B positions.  The inevitable fact of complaints made by U.S. worker applicants not hired will create, in effect, a burden to establish that there are no willing, able, or qualified U.S. workers for the position along with considerable potential liability upon H-1B hiring firms.
    (a) Department of Labor Website- Paragraph (3) of section 212(n) of the Immigration and Nationality Act (8 U.S.C. 1182(n)) is amended to read as follows:
    `(3)(A) Not later than 90 days after the date of the enactment of the H-1B and L-1 Visa Reform Act of 2009, the Secretary of Labor shall establish a searchable Internet website for posting positions as required by paragraph (1)(C). Such website shall be available to the public without charge.
    `(B) The Secretary may work with private companies or nonprofit organizations to develop and operate the Internet website described in subparagraph (A).
    `(C) The Secretary may promulgate rules, after notice and a period for comment, to carry out the requirements of this paragraph.'.
    (b) Requirement for Publication- The Secretary of Labor shall submit to Congress and publish in the Federal Register and other appropriate media a notice of the date that the Internet website required by paragraph (3) of section 212(n) of such Act, as amended by subsection (a), will be operational.
    (c) Application- The amendments made by subsection (a) shall apply to an application filed on or after the date that is 30 days after the date described in subsection (b).
     




    [1] See, "CIR ASAP",  Subtitle B--Reforms of Certain Classes of Employment-based Visas
    CHAPTER 1--H-1B VISA FRAUD AND ABUSE PROTECTIONS
    Subchapter A--H-1B Employer Application Requirements
    SEC. 531. MODIFICATION OF APPLICATION REQUIREMENTS.
     
     

  4. The Fight Book: Appendix I

    Rami Fakhoury and Mark Levey
    Copyright @2010 Fakhoury Law Group/ Rami Fakhoury
     
    APPENDIX  I
    Administrative Procedure Act
    http://www.archives.gov/federal-register/laws/administrative-procedure/551.html

    UNITED STATES CODE

    TITLE 5 - GOVERNMENT ORGANIZATION AND EMPLOYEES

    PART I - THE AGENCIES GENERALLY

    CHAPTER 5 - ADMINISTRATIVE PROCEDURE

    SUBCHAPTER II - ADMINISTRATIVE PROCEDURE












    551. Definitions
    For the purpose of this subchapter -
    (1) ''agency'' means each authority of the Government of the United States, whether or not it is within or subject to review by another agency, but does not include -
    (A) the Congress;
    (B) the courts of the United States;
    (C) the governments of the territories or possessions of the United States;
    (D) the government of the District of Columbia;
    or except as to the requirements of section 552 of this title -
    (E) agencies composed of representatives of the parties or of representatives of organizations of the parties to the disputes determined by them;
    (F) courts martial and military commissions;
    (G) military authority exercised in the field in time of war or in occupied territory; or
    (H) functions conferred by sections 1738, 1739, 1743, and 1744 of title 12; chapter 2of title 41; or sections 1622, 1884, 1891-1902, and former section 1641(b)(2), of title 50, appendix;
    (2)''person'' includes an individual, partnership, corporation, association, or public or private organization other than an agency;
    (3) ''party'' includes a person or agency named or admitted as a party, or properly seeking and entitled as of right to be admitted as a party, in an agency proceeding, and a person or agency admitted by an agency as a party for limited purposes;
    (4) ''rule'' means the whole or a part of an agency statement of general or particular applicability and future effect designed to implement, interpret, or prescribe law or policy or describing the organization, procedure, or practice requirements of an agency and includes the approval or prescription for the future of rates, wages, corporate or financial structures or reorganizations thereof, prices, facilities, appliances, services or allowances therefore or of valuations, costs, or accounting, or practices bearing on any of the foregoing;
    (5) ''rule making'' means agency process for formulating, amending, or repealing a rule;
    (6) ''order'' means the whole or a part of a final disposition, whether affirmative, negative, injunctive, or declaratory in form, of an agency in a matter other than rule making but including licensing;
    (7) ''adjudication'' means agency process for the formulation of an order;
    (8) ''license'' includes the whole or a part of an agency permit, certificate, approval, registration, charter, membership, statutory exemption or other form of permission;
    (9) ''licensing'' includes agency process respecting the grant, renewal, denial, revocation, suspension, annulment, withdrawal, limitation, amendment, modification, or conditioning of a license;
    (10) ''sanction'' includes the whole or a part of an agency -
    (A) prohibition, requirement, limitation, or other condition affecting the freedom of a person;
    (B) withholding of relief;
    (C) imposition of penalty or fine;
    (D) destruction, taking, seizure, or withholding of property;
    (E) assessment of damages, reimbursement, restitution, compensation, costs, charges, or fees;
    (F) requirement, revocation, or suspension of a license; or
    (G) taking other compulsory or restrictive action;
    (11) ''relief'' includes the whole or a part of an agency -
    (A) grant of money, assistance, license, authority, exemption, exception, privilege, or remedy;
    (B) recognition of a claim, right, immunity, privilege, exemption, or exception; or
    (C) taking of other action on the application or petition of, and beneficial to, a person;
    (12) ''agency proceeding'' means an agency process as defined by paragraphs (5), (7), and (9) of this section;
    (13) ''agency action'' includes the whole or a part of an agency rule, order, license, sanction, relief, or the equivalent or denial thereof, or failure to act; and
    (14) ''ex parte communication'' means an oral or written communication not on the public record with respect to which reasonable prior notice to all parties is not given, but it shall not include requests for status reports on any matter or proceeding covered by this subchapter.



    Next Section (552(a) Records Maintained On Individuals; 552(b) Open Meetings)(Skipped)



    553. Rule making
    (a) This section applies, according to the provisions thereof, except to the extent that there is involved -
    (1) a military or foreign affairs function of the United States; or
    (2) a matter relating to agency management or personnel or to public property, loans, grants, benefits, or contracts.
    (b) General notice of proposed rule making shall be published in the Federal Register, unless persons subject thereto are named and either personally served or otherwise have actual notice thereof in accordance with law. The notice shall include -
    (1) a statement of the time, place, and nature of public rule making proceedings;
    (2) reference to the legal authority under which the rule is proposed; and
    (3) either the terms or substance of the proposed rule or a description of the subjects and issues involved.
    Except when notice or hearing is required by statute, this subsection does not apply -
    (A) to interpretative rules, general statements of policy, or rules of agency organization, procedure, or practice; or
    (B) when the agency for good cause finds (and incorporates the finding and a brief statement of reasons therefore in the rules issued) that notice and public procedure thereon are impracticable, unnecessary, or contrary to the public interest.
    (c) After notice required by this section, the agency shall give interested persons an opportunity to participate in the rule making through submission of written data, views, or arguments with or without opportunity for oral presentation. After consideration of the relevant matter presented, the agency shall incorporate in the rules adopted a concise general statement of their basis and purpose. When rules are required by statute to be made on the record after opportunity for an agency hearing, sections 556 and 557 of this title apply instead of this subsection.
    (d) The required publication or service of a substantive rule shall be made not less than 30 days before its effective date, except -
    (1) a substantive rule which grants or recognizes an exemption or relieves a restriction;
    (2) interpretative rules and statements of policy; or
    (3) as otherwise provided by the agency for good cause found and published with the rule.
    (e) Each agency shall give an interested person the right to petition for the issuance, amendment, or repeal of a rule.



    Previous Section   |   Next Section



    554. Adjudications
    (a) This section applies, according to the provisions thereof, in every case of adjudication required by statute to be determined on the record after opportunity for an agency hearing, except to the extent that there is involved -
    (1) a matter subject to a subsequent trial of the law and the facts de novo in a court;
    (2) the selection or tenure of an employee, except a (FOOTNOTE 1) administrative law judge appointed under section 3105 of this title;
    (FOOTNOTE 1) So in original.
    (3) proceedings in which decisions rest solely on inspections, tests, or elections;
    (4) the conduct of military or foreign affairs functions;
    (5) cases in which an agency is acting as an agent for a court; or
    (6) the certification of worker representatives.
    (b) Persons entitled to notice of an agency hearing shall be timely informed of -
    (1) the time, place, and nature of the hearing;
    (2) the legal authority and jurisdiction under which the hearing is to be held; and
    (3) the matters of fact and law asserted.
    When private persons are the moving parties, other parties to the proceeding shall give prompt notice of issues controverted in fact or law; and in other instances agencies may by rule require responsive pleading. In fixing the time and place for hearings, due regard shall be had for the convenience and necessity of the parties or their representatives.
    (c) The agency shall give all interested parties opportunity for -
    (1) the submission and consideration of facts, arguments, offers of settlement, or proposals of adjustment when time, the nature of the proceeding, and the public interest permit; and
    (2) to the extent that the parties are unable so to determine a controversy by consent, hearing and decision on notice and in accordance with sections 556 and 557 of this title.
    (d) The employee who presides at the reception of evidence pursuant to section 556 of this title shall make the recommended decision or initial decision required by section 557 of this title, unless he becomes unavailable to the agency. Except to the extent required for the disposition of ex parte matters as authorized by law, such an employee may not -
    (1) consult a person or party on a fact in issue, unless on notice and opportunity for all parties to participate; or
    (2) be responsible to or subject to the supervision or direction of an employee or agent engaged in the performance of investigative or prosecuting functions for an agency.
    An employee or agent engaged in the performance of investigative or prosecuting functions for an agency in a case may not, in that or a factually related case, participate or advise in the decision, recommended decision, or agency review pursuant to section 557 of this title, except as witness or counsel in public proceedings. This subsection does not apply -
    (A) in determining applications for initial licenses;
    (B) to proceedings involving the validity or application of rates, facilities, or practices of public utilities or carriers; or
    (C) to the agency or a member or members of the body comprising the agency.
    (e) The agency, with like effect as in the case of other orders, and in its sound discretion, may issue a declaratory order to terminate a controversy or remove uncertainty.



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    555. Ancillary matters
    (a) This section applies, according to the provisions thereof, except as otherwise provided by this subchapter.
    (b) A person compelled to appear in person before an agency or representative thereof is entitled to be accompanied, represented, and advised by counsel or, if permitted by the agency, by other qualified representative. A party is entitled to appear in person or by or with counsel or other duly qualified representative in an agency proceeding. So far as the orderly conduct of public business permits, an interested person may appear before an agency or its responsible employees for the presentation, adjustment, or determination of an issue, request, or controversy in a proceeding, whether interlocutory, summary, or otherwise, or in connection with an agency function. With due regard for the convenience and necessity of the parties or their representatives and within a reasonable time, each agency shall proceed to conclude a matter presented to it. This subsection does not grant or deny a person who is not a lawyer the right to appear for or represent others before an agency or in an agency proceeding.
    (c) Process, requirement of a report, inspection, or other investigative act or demand may not be issued, made, or enforced except as authorized by law. A person compelled to submit data or evidence is entitled to retain or, on payment of lawfully prescribed costs, procure a copy or transcript thereof, except that in a nonpublic investigatory proceeding the witness may for good cause be limited to inspection of the official transcript of his testimony.
    (d) Agency subpoenas authorized by law shall be issued to a party on request and, when required by rules of procedure, on a statement or showing of general relevance and reasonable scope of the evidence sought. On contest, the court shall sustain the subpoena or similar process or demand to the extent that it is found to be in accordance with law. In a proceeding for enforcement, the court shall issue an order requiring the appearance of the witness or the production of the evidence or data within a reasonable time under penalty of punishment for contempt in case of contumacious failure to comply.
    (e) Prompt notice shall be given of the denial in whole or in part of a written application, petition, or other request of an interested person made in connection with any agency proceeding. Except in affirming a prior denial or when the denial is self-explanatory, the notice shall be accompanied by a brief statement of the grounds for denial.



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  5. The Fight Book: Chapter 2: Litigation Issues, Part D

    Rami Fakhoury and Mark Levey
    Copyright @2010 Fakhoury Law Group/Rami Fakhoury
    D. Litigation Issues - Non-Discretionary Grounds of Appeal
     
    1.   Background to Constitutional Claims  - The Yick Wo Case (1886)
    When Agency misadministration reaches the level of constitutional harm, grounds for appeal separate and above abuse of discretion arises.  As the Fragomen v. USDOL case shows, where suits against agencies are competently presented, the courts have begun to assert jurisdiction over questions of law and constitutional issues.  While Congress has stripped the courts of power to review many types of discretionary USCIS and Immigration Court determinations, business immigration is not off-limits to litigation.
    The Equal Protection Clause of 14th Amendment has been held to attach to companies and commercial activities for many decades.  Commercial activities, and the rights of those who operate them, are particularly favored under American law.  Discrimination against certain types of businesses because of their foreign ownership has been held to be unconstitutional going back to the Chinese laundries case of 1886.  Yick Wo v. Hopkins, 118 US 356 .  In that seminal decision, the Supreme Court ruled that a law regulating business that is race-neutral on its face, but is administered in a prejudicial manner, is an infringement of the Equal Protection Clause and thus lacks a "rational basis".  Justice Matthews joined by a unanimous court found:
     
    The necessary tendency, if not the specific purpose, of this ordinance, and of enforcing it in the manner indicated in the record, is to drive out of business all the numerous small laundries, especially those owned by Chinese, and give a monopoly of the business to the large institutions established and carried on by means of large associated Caucasian capital.  [ . . . ]
    [I]t seems to us that there has been a wide departure from the principles that have heretofore been supposed to guard and protect the rights, property, and liberties of the American people. And if, by an ordinance general in its terms and form, like the one in question, by reserving an arbitrary discretion in the enacting body to grant or deny permission to engage in a proper and necessary calling, a discrimination against any class can be made in its execution, thereby evading and in effect nullifying the provisions of the national constitution, then the insertion of provisions to guard the rights of every class and person in that instrument was a vain and futile act.
    The period of the late 1880s was in some ways very much like that today.  Following a massive expansion of U.S. industry and communications lines built largely with immigrant labor, tens of thousands of Chinese workers who had laid the tracks for the Union Pacific Railroad began to establish lives for themselves and their families in their adopted land.  Many settled and opened small shops and businesses in San Francisco, the port city where they had initially arrived.
    One of the more popular entrepreneurial ventures of Bay Area citizens from China was laundry and tailoring.
    About two-thirds of the laundry's owners and almost 90 percent of the city's laundry workers were then of Chinese origin. This did not always sit well with their neighbors.  In 1880, the city of San Francisco passed an ordinance that persons could not operate a laundry in a wooden building without a permit from the Board of Supervisors. The ordinance conferred upon the Board of Supervisors to grant or withhold these permits at their discretion.
    After passage of that ordinance, of the wooden building laundry owners who applied for a permit, not a single permit was granted to a Chinese owner, while only one out of some eighty non-Chinese applicants was       denied a permit.
    Lee Yick, who had operated a laundry in the same wooden building for many years and held a valid license to operate his laundry previously issued by the Board of Fire-Wardens. He continued to operate his laundry without further license from the supervisors, and was convicted and fined $10.00, which he refused to pay. He sued for a writ of habeaus corpus after he was imprisoned.
     
    2.   There is no Discretion to Discriminate: Are Indian Outsourcing Companies being Treated as the Chinese Laundries of the 21st Century?
    The Yick Wo decision was a powerful statement about equality under American law, at a time that was not universally respected, and Jim Crow racial discrimination was proliferating.  Justice Matthews did not disguise the indignation the Court felt at the fact that government power was used to put a particular type of business owned and operated by non-citizens out of business in order to advance native economic interests:
     
    'The effect of the execution of this ordinance in the manner indicated in the record would seem to be necessarily to close up the many Chinese laundries now existing, or compel their owners to pull down their present buildings and reconstruct of brick or stone, or to drive them outside the city and county of San Francisco . . . beyond the convenient reach of customers, either of which results would be little short of absolute confiscation of the large amount of property . . .. If this would not be depriving such parties of their property without due process of law, it would be difficult to say what would effect that prohibited result. The necessary tendency, if not the specific purpose, of this ordinance, and of enforcing it in the manner indicated in the record, is to drive out of business all the numerous small laundries, especially those owned by Chinese, and give a monopoly of the business to the large institutions established and carried on by means of large associated Caucasian capital.  
     
     
    3.  THE CHENERY II  "INFORMED DISCRETION" STANDARD:  Rulemaking by Adjudication Valid Only When the Agency Exercises Expert Judgment Applied to Limited Cases.
    Federal agencies are generally required to provide notice of proposed rules and consider comments about those rules. 5 U.S.C. 553. However, "interpretive" rules are exempt from this process. 5 U.S.C. 553(b)(3)(A); Gunderson v. Hood, 268 F.3d 1149, 1155 (9th Cir. 2001). Interpretive rules generally clarify or explain, but cannot be inconsistent with or amend an existing rule. Gunderson, 268 F.3d at 1155.
    Where the courts have allowed agencies an exception to the APA "publication and comment" requirement to permit rulemaking by adjudication, the courts have imposed limits on that practice.  First, the agency must exercise expert judgment in an individualized determination.  This gives rise to the "informed discretion" standard articulated in the landmark Chenery II case and the line of cases that follow it.   Furthermore, the agency can only substitute its own informed discretion for normal rulemaking in limited circumstances where the need for a published rule could not be foreseen.  Once an issue is decided upon, the agency must publish its rule, and may not broadly apply ad hoc rules without publication.
    Sixty years after Yick Wo, the Court issued another landmark decision limiting the powers of government to arbitrarily shut down business.  In SEC V. CHENERY CORP., 332 U. S. 194 (1947)("Chenery II") an case brought in the immediate wake of the Administrative Procedures Act (APA), involved management of a publicly-traded water company accused of illegal stock manipulation. The first time this case made it to the Supreme Court (Chenery I), the Court held that the acts committed by the company did not amount to common law fraud and therefore the SEC's stated rationale for the charges could not be sustained.
    On remand, the SEC charged the company's officials on different grounds, under its own enabling act. The court used the case as an opportunity to discuss the merits of policymaking through adjudication and retroactive rule-making by federal agencies.
    The court stated that policymaking through administrative adjudication is not necessarily wrong and may be desirable, but only under limited circumstances. Adjudication may be more flexible than rule-making and allows policy to be made on an ad hoc basis. This flexibility is important where there may be unforeseeable problems, inexperience with the problem, or the problem is so specialized in varied that a general rule would be impossible. Therefore, the choice between rule-making and adjudication lies in the informed discretion of the agency.
    Chenery II is often cited to illustrate the deference under the APA that courts have long shown to agency's powers to exercise policy-making by adjudication, and an agency may sometimes substitute its own "informed discretion" based in agency expertise for judicial decisions, where the two may conflict.  However, Chenery II and the line of decisions that follow it stand for a third major principle of Administrative Law and that is: "informed discretion" implies a requirement for application of expert judgment and reasoned analysis to individual cases rather than a blanket application of policy.  Rule-making by adjudication is an exceptional practice involving decision-making of the highest standard.  Decision-making in lieu of published rule must be of the highest standard; thus, per curium application of de facto rules is an abuse of discretion:
    administrative judgments are entitled to the greatest amount of weight by appellate courts . . . [if the product of] administrative experience, appreciation of the complexities of the problem, realization of the statutory policies, and responsible treatment of the uncontested facts. It is the type of judgment which administrative agencies are best equipped to make and which justifies the use of the administrative process. See Republic Aviation Corporation v. Labor Board, 324 U. S. 793, 324 U. S. 800.   
     
    4.  Chenery II:  Change in Substantial Agency Rules Without Notice and Comment is Restricted to a Case the Administrative Agency "Could Not Reasonably Foresee"
     
    Chenery II also laid restrictions on the circumstances under which agencies could change their rules through adjudications.  Rule-making through adjudications give an agency flexibility but, the Court held, it is acceptable in lieu of normal APA "publication and comment" procedures strictly in the context of novel circumstances[1]:
    [P]roblems may arise in a case which the administrative agency could not reasonably foresee, problems which must be solved despite the absence of a relevant general rule. Or the agency may not have had sufficient experience with a particular problem to warrant rigidifying its tentative judgment into a hard and fast rule. Or
    Page 332 U. S. 203
    the problem may be so specialized and varying in nature as to be impossible of capture within the boundaries of a general rule. In those situations, the agency must retain power to deal with the problems on a case-to-case basis if the administrative process is to be effective. There is thus a very definite place for the case-by-case evolution of statutory standards. And the choice made between proceeding by general rule or by individual, ad hoc litigation is one that lies primarily in the informed discretion of the administrative agency. See Columbia Broadcasting System v. United States, 316 U. S. 407, 316 U. S. 421.
    Where similar issues arise over and over again over a longer period of time, Chenery II is clearly telling us, published regulations are mandatory when the rule is amenable to general application or the rule made by adjudication will not receive deference. 
     
     




    [1]         II, Ibid., 332, http://supreme.justia.com/us/332/194/case.html
     

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