THE ABC'S OF IMMIGRATION - IMMIGRATION ISSUES RELATED TO CORPORATE DOWNSIZING

Without Proper Planning, Layoffs Can Present Significant Immigration Problems for Both Employers and Employees 

Since the economy began its decline back in the Spring of 2000, corporate downsizing has increased across all industry sectors as companies seek to cut costs to remain competitive. Employers engaged in lay offs are faced with the considerable challenge of managing the legal aspects involved in the downsizing process while trying to do their best to help their employees transition to new employment.  Generally, most employers are well aware of their obligations under the labor and employment laws applicable to lay off situations.  Likewise, most employers understand the need to provide their employees information on the lay off process, including information on benefits continuation, how to apply for unemployment compensation, and, in some cases even provide career transition counseling and job search services for their employees.  However, in the case of employers that employ alien workers, the individuals responsible for managing the downsizing process often overlook the significant immigration-related consequences impacting both the employer and its alien employees when lay offs take place.

IMMIGRATION-RELATED CONSEQUENCES OF LAYOFFS ON ALIEN EMPLOYEES

For employers that employ foreign nationals, the company’s alien workforce consists of two separate groups of employees:  nonimmigrant workers and immigrant workers.  Nonimmigrant workers usually fall under the H-1B, L, E and TN temporary visa categories.  The most common nonimmigrant employment visa, H-1B, is used for an “alien who is coming to perform services in a specialty occupation” in the United States.  L visas are used for intra-company transferees that enter the US to render services “in a capacity that is managerial, executive, or involves specialized knowledge”, while E visas are used for “treaty traders and investors.”  Finally, the TN category includes “Canadian and Mexican citizens seeking temporary entry to engage in business activities at a professional level” as listed in the North American Free Trade Agreement.  As compared to nonimmigrant workers, immigrant workers are those who have obtained or are in the process of obtaining lawful permanent residency. 

Nonimmigrant work visas are issued for the specific purpose of employment with a particular employer.  Thus, a nonimmigrant residing in the US under one of the temporary work visa categories is legally authorized to remain in the US only as long as they are employed with the particular employer noted in their visa application.  If the employee is laid off, they immediately lose their visa status.  As a result, employers that lay off nonimmigrant employees with little or no notice put these individuals in the difficult situation of having to quickly find an alternative visa status in order to remain legally in the US.  If the nonimmigrant employee cannot secure an alternative status, they must choose between remaining in this country illegally or leaving everything behind and returning to their home country to possibly seek a new visa status from abroad.  If the nonimmigrant is married, or has children, his or her dependants must also leave the country as their legal status is derived from the visa status of the nonimmigrant worker.  This can be particularly hard when, for example, children must be pulled out of school in the middle of the school year or someone in the family is receiving regular treatment for a medical condition.

Securing an alternative visa status on short notice is very difficult to do.  Even if the nonimmigrant is fortunate enough to secure an alternate employment offer, he or she would not be permitted to begin work for the new employer under most nonimmigrant work visa categories until a new visa petition is actually approved, something which could take up to several months.   Under the H-1B visa category, nonimmigrant workers can legally start work for a new employer immediately upon filing a new visa petition, but rarely can a nonimmigrant expect to find a new employer willing to sponsor an H-1B visa instantaneously upon being notified of their termination.  Nonimmigrants who do not have immediately available new job prospects may be able to secure another temporary visa status, like a tourist visa, which would allow them to remain legally in the US, but it would not allow them to engage in any type of employment and still means they will be without work for at least a few months.

In situations where the nonimmigrant remains in the US in a visa category that prohibits employment or while an employment-based visa is pending, the individual is generally not eligible to collect any type of unemployment compensation under most states laws because unemployment statutes usually require that an individual must be available to work and authorized to accept work to be eligible for unemployment compensation.  Thus, unlike their US counterparts, these alien workers must get by without any supplemental income during this interim period even though unemployment taxes were deducted from their wages while they were employed. 

If the nonimmigrant employee is unable to secure a legal visa status after being laid off, any time spent out of status has the potential to create significant future problems that the nonimmigrant often does not realize.  Even minor periods of time spent out of legal status can render the nonimmigrant ineligible for certain immigration benefits.  For example, in the final stage of the green card process, an individual usually has the choice of completing the process from within the US (referred to as adjustment of status) or at the US Consulate located in their home country.  However, individuals who have spent any period of time out of status are potentially not eligible to adjust status and must endure the disruption of having to return home to complete their green card process. 

Individuals who spend longer periods of time out of status are faced with considerably more serious consequences.  Under immigration law, individuals who are unlawfully present in the US for a period of six months to one year are barred from reentering the US for three years.  Individuals unlawfully present in the US for over one year are barred for ten years.   

For immigrant employees, a layoff can present different problems.  Often, after having an opportunity to evaluate an alien employee’s skills and future potential, an employer will agree to sponsor the alien for lawful permanent residency status, commonly referred to as “green card” status. A lawful permanent residency (“LPR”) application generally consists of three steps. First, through a process called labor certification, the employer must prove to the satisfaction of the Department of Labor that it has not been able to find a domestic employee to fill the alien’s position.  Second, after the labor certification is complete, the employer files an immigrant petition with the INS.  Finally, after the immigrant petition is approved, the employee files a petition for the adjustment of his or her immigration status to the status of a lawful permanent resident with the INS.  The entire LPR process may take several years. 

The LPR process is predicated on the idea of granting an alien permanent work authorization to work for a particular employer in a particular position.  Thus, alien employees who are laid off during the first two steps of the LPR process cannot continue with their application, and must restart the entire process with another employer if they remain interested in securing LPR status.  Alien employees laid off during the third step of the process may or may not be able to continue the LPR process depending on their situation.  Historically, alien employees could not switch employers before their status was adjusted without risking invalidation of their underlying immigrant petition.  However, under a new law passed in October 2000, an alien employee whose adjustment of status application has been pending for over six months can now switch employers without validating his or her immigrant petition as long as they will be working in a position similar to the position noted in their labor certification and immigrant petition.

For alien workers who have already secured LPR status, the impact of being laid off is not much different from that of a US worker.  The alien green card holder would continue to be in lawful permanent residency status while he or she looks for new employment.  Many immigrants who have recently obtained their green card status may be rightfully concerned about leaving their positions too quickly after getting permanent residency. The INS will sometimes accuse an individual of not having appropriate intentions when they got permanent residency. However, an involuntary termination of employment will not trigger that type of problem. Also, depending on the applicable state law, the alien LPR might be eligible for unemployment compensation because he or she is lawfully present in the US and is available and authorized to accept employment.

IMMIGRATION-RELATED CONSEQUENCES OF LAYOFFS ON COMPANIES EMPLOYING FOREIGN NATIONALS

When downsizing includes laying off a company’s alien workers, the employer must be cognizant of its affirmative duties under immigration law with respect to those workers.  For most employment-related visa types, the employer has an affirmative responsibility to notify the INS when an alien’s employment has been terminated so that INS can revoke the individual’s visa.  With respect to H-1B employees, the employer also must provide the H-1B worker return transportation to their home country at the employer’s expense. 

In the H-1B context, these affirmative responsibilities are particularly important because employers that do not comply with these obligations run the risk of being subject to continuing wage obligations for the H-1Bemployee.  Under the anti-benching provisions of the H-1B regulations, an employer must continue to pay an H-1B employee their normal wages during any time spent in nonproductive status “due to the decision of the employer.”  In a layoff situation, the employer’s payment obligation ends only if there has been a “bona fide” termination of the employment relationship, which the DOL will deem to have occurred when the employer notifies the INS of the termination, the H-1B petition is canceled, and the return fare obligation is fulfilled.

In addition to complying with its affirmative immigration obligations when laying off alien workers, an employer must also be aware of other possible consequences of its downsizing strategy, particularly with respect to the H-1B visa program.  One possible issue that could arise in a layoff scenario concerns severance benefits provided by the employer.  Under newly issued immigration regulations, all employers employing H-1B workers are required to provide these workers with fringe benefits equivalent to those of its US workers.  While the DOL has not said whether severance benefits would fall under the definition of “fringe benefits,” DOL could possibly interpret the failure to provide similar severance benefits to both US and H-1B workers as a violation of the H-1B regulations. 

Another possible issue that may arise with downsizing relates to how the resulting change in the employer’s workforce impacts its calculation of “H-1B dependency,” a concept outlined in the final H-1B regulations issued by the DOL in December 2000.  Under these regulations, an employer with 25 or fewer employees is considered “H-1B dependent’ if it has more than 7 H-1B employees.  Employers with between 26 and 50 employees are considered “H-1B dependent” if they have more than 12 H-1B employees.  An employer with over 50 employees is “H-1B dependent” if more than 15% of its employees are H-1B visa holders. 

When an employer lays off a significant number of workers, regardless of whether they are US or H-1B workers, it is important that the employer recalculate if it is an H-1B dependent employer.  Non-dependent employers that become dependent will become subject to a myriad of additional legal requirements applicable to H-1B dependent employers.  Likewise, an H-1B dependent employer could become non-dependent following a downsizing, thus relieving itself from many burdensome obligations. 

If you are an H-1B dependent employer, downsizing can present even more issues to consider.  Under a new immigration law, H-1B dependent employers filing a visa petition must attest under oath that they have not displaced a US worker for a period of 90 days before and 90 days after the petition is submitted.  A “displacement” occurs when an employer lays off a US worker from a job essentially equivalent to that offered the H-1B worker.  A US worker that accepted an offer of voluntary retirement is not considered to have been “laid off.”  Also, a lay off does not result when the employer offers the US worker a similar employment position at equivalent or higher terms in lieu of termination.  To comply with these anti-displacement provisions, H-1B dependant employers are required to keep detailed records relating to all layoffs impacting US workers. 

H-1B dependent employers that place their H-1B employees with secondary employers where there are “indicia of employment” between the secondary employer and the H-1B worker can also sustain displacement liability when the secondary employer lays off US workers.  Under the new H-1B regulations, US workers at secondary employers are also protected from displacement by H-1B workers.  Thus, if an H-1B dependent employer is placing an H-1B employee with a secondary employer, the H-1B dependent employer must use due diligence to make sure the secondary employer has not displaced any US workers in a position equivalent to that offered the H-1B worker for a period of 90 days before and after filing the H-1B petition.  Secondary employers who lay off workers are not subject to any liability, so the H-1B dependent employer is obliged to make inquiries as to the secondary employer’s lay offs and cannot ignore constructive knowledge that the layoffs have occurred.

Employers that violate either the primary or secondary employer displacement prohibitions can be subject to both monetary penalties and/or be barred from using the H-1B program.  This being the case, H-1B dependent employers who have laid off US workers or place employees with secondary employers who have laid off US workers must be extremely careful when hiring new H-1B employees. 

PROACTIVE STRATEGIES FOR PREVENTING NEGATIVE IMMIGRATION CONSEQUENCES FOR EMPLOYERS AND EMPLOYEES DURING DOWNSIZING

With careful planning, employers can protect themselves and their employees from most of the immigration problems associated with corporate downsizing discussed above.  Here are some general guidelines to keep in mind when developing your company’s layoff strategy:

1.         Try to provide alien employees who will be laid off as much advance notice as possible.  With advance notice, alien employees are in a better position to take steps to secure an alternate visa status, allowing them to remain legally in the US without having to spend time out of status, or being required to leave the country.  Also, employers should try to fully understand each individual’s immigration situation.    Often times, employers may learn through this exercise that by keeping an alien employee employed for a few more weeks or months, the alien employee can secure immigration benefits that would take several years to reprocess if the employee had to start over.  If you feel you do not fully understand the immigration issues facing your alien employees, you should work with an immigration attorney to help develop a comprehensive transition plan.

2.         Make sure you are aware of all of the affirmative immigration-related obligations that apply to you based on the types of alien employees you are laying off.  Different visa categories have different requirements when terminating employment, and a failure to comply with these requirements could result in considerable financial liability on the part of the employer.

3.         As layoffs occur, make sure you constantly reassess whether the resulting change in the makeup of your workforce impacts the “H-1B dependency” determination.  A change in your company’s classification could result in a substantial increase or decrease in legal compliance obligations.

4.         If you are an H-1B dependent employer, carefully consider how layoffs at your company, or at companies where you place your employees, impact the prohibition against displacing US workers.