CLIENT UPDATE FINAL RULE REQUIRING EMPLOYERS TO PAY LABOR CERTIFICATION COSTS, AND MAKING OTHER CHANGES, ISSUED BY DEPARTMENT OF LABOR

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1 CLIENT UPDATE FINAL RULE REQUIRING EMPLOYERS TO PAY LABOR CERTIFICATION COSTS, AND MAKING OTHER CHANGES, ISSUED BY DEPARTMENT OF LABOR On May 17, 2007, the Department of Labor published a final rule implementing a package of changes to the labor certification process. DOL believes these changes are necessary to reduce the incentive for employers to file applications for labor certification unless there is a bona fide job opportunity available to U.S. workers. These regulations were first proposed in March of 2004, and DOL accepted public comment, which it largely disregarded in the final rule. The effective date of the amendments made to the regulations is July 16, This Client Update summarizes the main features of the amendment. Requirements that Employer Pay All Costs of the Labor Certification Process In the last four years, several published cases have resulted in conviction of unscrupulous attorneys and employers who were abusing the system. In many of these schemes, attorneys charged exorbitant fees ($20,000 or more) to prepare and file labor certifications on behalf of workers without making the employers aware that a labor certification application was being filed. In other cases, employers filed multiple labor certifications on behalf of similarly-qualified non-employees so that they could sell the approved labor certifications to other immigrants. To address these abuses of the system, DOL in its PERM rule took steps to ensure that the employer must be actively involved in the labor certification process. This new rule goes further, implementing a requirement that prevents any employer from requiring an employee to pay, or accepting any reimbursement from an employee for any costs relating to the labor certification process. The rule specifically prohibits an employer

2 from seeking or receiving payment of any kind for any activity relating to obtaining permanent labor certification, including payment of the employer s attorney s fees. In addition, the rule specifies that if the same attorney is representing both the employee and the employer in the labor certification process, any costs relating to assistance to the employee must also be borne by the employer. While the prohibition on any reimbursement of the employer s expenses is stated very generally in the regulation, the supplemental documentation to the regulation makes clear that the Department of Labor is also prohibiting the common practice of requiring an employee to sign a payback agreement as a condition of starting the labor certification process. Such agreements normally provide that the employer will pay all labor certification costs, but that if the employee resigns from the employer s business during the process or within a certain time after obtaining permanent residence, the employee will have to reimburse the employer. In response to the proposed rule, employers commented that payback agreements are normal to industry in other contexts, such as employer-provided training or graduate education. Such agreements simply protect an employer from an unscrupulous employee, who would take the costs the employer had assumed and the benefit of the labor certification process (permanent residence allowing that employer to work for any employer) without living up to a commitment to stay with the employer. The Department of Labor felt, however, that any arrangements under which the costs of the labor certification process were not completely borne by the employer were an incentive for applications to be filed where the employer had no intention of long term employment for the employee, and so prohibited that practice. The requirement that employers pay the labor certification expenses does not mandate the employer to pay all expenses relating to the entire green card process. The labor certification is only one of three steps that the employer and then the employee must complete in order for the employee to become a permanent resident. We will be offering a package of labor certification preparation services to our clients who have not previously assumed these costs in order to help them manage the requirements of this new rule. Klasko, Rulon, Stock & Seltzer, LLP Page 2 of 5

3 Other Changes in the new rule Under current law and practice, labor certifications, once issued, are valid indefinitely. If not needed for the original beneficiary, they can be re-used for another qualified worker. This combination of indefinite validity and the ability to substitute a new employee has created a market for labor certifications approved by the Department of Labor, but not used for an immigrant petition on behalf of a specific worker. In one reported case, the employer requested $120,000 from a new employee to be substituted as the beneficiary of an approved labor certification. In order to combat this practice, the new rule also makes several other changes that are meant to reduce the incentive employers have to engage in the labor certification process unless they actually have an intention to continue to employ the worker on an ongoing basis. It also provides new sanctions for violating the rules, including the possibility of debarring the employer and/or the attorney from filing any labor certification application for up to three years. Substitution of Beneficiaries Eliminated The Department of Labor felt very strongly that the ability of an employer to substitute a beneficiary onto an approved labor certification was at the root of many of the abuses of the labor certification process it found when auditing and securing conviction of several attorneys and employers for filing fraudulent labor certifications. The substitution of beneficiaries rule allows an employer who obtained labor certification for a particular employee who no longer needs it (by ceasing to be employed, or by having another way to immigrate) to use that labor certification on behalf of another employee. The new employee must be offered the same job and must have been qualified for the labor certification as of the time it was filed. Even though commentators overwhelmingly disapproved of the elimination of substitution of beneficiaries, particularly given the requirement that the employer pay all costs of the labor certification process, the Department of Labor felt very strongly that the labor certification should only be valid for one particular employee in one specific job, and therefore eliminated the ability of employers to substitute beneficiaries as of July 16, Thus, if an employer wishes to substitute a beneficiary on an approved labor certification it has already obtained, it has less than 60 days to do so. Klasko, Rulon, Stock & Seltzer, LLP Page 3 of 5

4 Validity Period of Approved Labor Certifications Another new regulation ends the indefinite validity of labor certifications, and requires that any immigrant visa petition on the basis of a labor certification must be filed within 180 days of the approval of the labor certification. This 180-day period is an improvement over the proposed rule, which would have required the immigrant visa petition to be filed within 45 days of certification, but still represents a radical departure from past practice. Under this rule, if the employer does not file an immigrant visa petition within the six months after the labor certification is approved, the labor certification is considered invalid and the employer would have to undertake all recruiting activity and file a new labor certification if the employer wished to continue to employ the employee. The rule provides for a transition period for labor certifications approved prior to the effective date of the new rule. For any labor certification approved prior to July 16, 2007, the employer will have 180 days after July 16, 2007, to file the immigrant visa petition. Prohibition on Sale, Barter or Exchange of Labor Certifications The new rule provides that labor certifications are not to be articles of commerce and may not be bought or sold for money or anything else of value. Since both substitution of beneficiaries and indefinite validity of labor certifications have been eliminated, this provision is of limited practical effect, since those two new rules have eliminated any benefit from purchasing an approved labor certification. The commentary to the rule makes clear that the prohibition does not extend to the payment of the purchase price of a business, where the new employer will take over the labor certifications in process on behalf of the employees of the business. Such employees will continue to be able to process labor certifications through the new employer, known as the successor in interest to the prior employer. Klasko, Rulon, Stock & Seltzer, LLP Page 4 of 5

5 Miscellaneous Provisions The Department of Labor also provided for a regulatory mechanism under which it can impose a complete prohibition from filing labor certifications on behalf of all employees if the Department of Labor finds that the employer, or its agent or attorney, has made a willful material misrepresentation in the process or has violated the requirements relating to payment of attorney fees and other costs of the labor certification process. This regulation includes the authority to debar employers who are found to have engaged in a pattern or practice of failure to comply with either the terms of employment offered in the labor certification, the audit process, or the supervised recruitment process. The rule also provides for a procedural mechanism for an employer subject to such a debarment to appeal its debarment to an administrative law judge. Employer Actions Needed In light of the Department of Labor s rule, employers will need to review their immigration policies, in particular their policies on initiation and payment or reimbursements of legal fees and advertising costs for the labor certification process, and determine how they are going to comply with the Department of Labor s new requirements. Employers may also wish to consider challenging the Department of Labor s requirement in court, as some employers are considering doing. We are preparing a more detailed analysis of the provisions and implications for employers, which will be circulated by next week. Klasko, Rulon, Stock & Seltzer, LLP Page 5 of 5