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[Federal Register: December 20, 2000 (Volume 65, Number 245)] [[Page 80109]] ----------------------------------------------------------------------- Part III Department of Labor ----------------------------------------------------------------------- Employment and Training Administration ----------------------------------------------------------------------- 20 CFR Parts 655 and 656 Temporary Employment in the United States of Nonimmigrants under H-1B Visas; Final Rule [[Page 80110]] ----------------------------------------------------------------------- DEPARTMENT OF LABOR Employment and Training Administration 20 CFR Parts 655 and 656 RIN 1215-AB09 Labor Condition Applications and Requirements for Employers Using Nonimmigrants on H-1B Visas in Specialty Occupations and as Fashion Models; Labor Certification Process for Permanent Employment of Aliens in the United States AGENCY: Employment and Training Administration, Labor, in concurrence with the Wage and Hour Division, Employment Standards Administration, Labor. ACTION: Interim final rule; request for comments. ----------------------------------------------------------------------- SUMMARY: This document contains interim final regulations implementing recent legislation and clarifying existing Departmental rules relating to the temporary employment in the United States of nonimmigrants under H-1B visas. On January 5, 1999, the Department published a notice of proposed rulemaking (64 FR 628) seeking public comment on issues to be addressed in regulations to implement changes made to the Immigration and Nationality Act (INA) by the American Competitiveness and Workforce Improvement Act of 1998 (ACWIA). In particular, the ACWIA requires H- 1B-dependent employers and willful violators to comply with certain additional attestations regarding anti-displacement and recruitment obligations. The Department also sought further comment on certain proposals which were previously published for comment as a Proposed Rule on October 31, 1995 (60 FR 55339), and on certain interpretations of the statutes and its existing regulations which the Department proposed to incorporate in the regulations. DATES: Effective Dates: These regulations are effective January 19, 2001, with the exception of Secs. 655.731(a)(2) and 656.40, (c) and (d) which are effective December 20, 2000. Applicabililty Date: Sections 655.731(a)(2) and 656.40 apply retroactively to any prevailing wage determinations thereunder which were not final as of October 21, 1998. Sections 655.720 and 655.721 are applicable to Labor Condition Applications filed on or after February 5, 2001. Comment Date: Written comments on these regulations and issues raised in the preamble may be submitted by February 20, 2001, with the exception of any comments on Form WH-4, which must be submitted by January 19, 2001. ADDRESSES: Submit written comments concerning Part 655 to Deputy Administrator, Wage and Hour Division, ATTN: Immigration Team, U.S. Department of Labor, Room S-3502, 200 Constitution Avenue, N.W., Washington, D.C. 20210. Commenters who wish to receive notification of receipt of comments are requested to include a self-addressed, stamped post card. Comments may also be transmitted by facsimile (``FAX'') machine to (202) 693-1432. This is not a toll-free number. Submit written comments concerning Part 656 to the Assistant Secretary for Employment and Training, ATTN: Division of Foreign Labor Certifications, U.S. Employment Service, Employment and Training Administration, Department of Labor, Room C-4318, 200 Constitution Avenue, NW., Washington, DC 20210. Commenters who wish to receive notification of receipt of comments are requested to include a self- addressed, stamped post card. Comments may also be transmitted by facsimile (``FAX'') machine to (202) 693-2769. This is not a toll-free number. FOR FURTHER INFORMATION CONTACT: Michael Ginley, Director, Office of Enforcement Policy, Wage and Hour Division, Employment Standards Administration, Department of Labor, Room S-3510, 200 Constitution Avenue, NW., Washington, DC 20210. Telephone: (202) 693-0745 (this is not a toll-free number). James Norris, Chief, Division of Foreign Labor Certifications, U.S. Employment Service, Employment and Training Administration, Department of Labor, Room C-4318, 200 Constitution Avenue, NW., Washington, DC 20210. Telephone: (202) 693-3010 (this is not a toll-free number). SUPPLEMENTARY INFORMATION: I. Paperwork Reduction Act The H-1B nonimmigrant program is a voluntary program that allows employers to temporarily import and employ nonimmigrants admitted under H-1B visas to fill specialized jobs not filled by U.S. workers. (Immigration and Nationality Act (INA), 8 U.S.C. 1101(a)(15)(H)(I)(b), 1182(n), 1184(c)). The statute, among other things, requires that an employer pay an H-1B worker the higher of the actual wage or the prevailing wage, to protect U.S. workers' wages and eliminate any economic incentive or advantage in hiring temporary foreign workers. Under the Immigration and Nationality Act (INA), as amended by the Immigration Act of 1990 (Act), and as amended by the Miscellaneous and Technical Immigration and Naturalization Amendments of 1991, an employer seeking to employ an alien in a specialty occupation or as a fashion model of distinguished merit and ability on an H-1B visa is required to file a labor condition application with and receive certification from DOL before the Immigration and Naturalization Service (INS) may approve an H-1B petition. The labor condition application process is administered by ETA; complaints and investigations regarding labor condition applications are the responsibility of ESA. On January 5, 1999, the Department of Labor (DOL) published a proposed rule which would implement statutory changes in the H-1B program made to the INA by the American Competitiveness and Workforce Improvement Act of 1998 (ACWIA) (Title IV, Pub. L. 105-277). The ACWIA, as amended by the American Competitiveness in the Twenty-First Century Act of 2000 (Pub. L. 106-313), among other things, temporarily (until October 2003) increases the maximum number of H-1B visas permitted each year; temporarily requires new non-displacement (layoff) and recruitment attestations by ``H-1B dependent'' employers (as defined by the ACWIA) and willfully violating employers; and requires employers to offer the same fringe benefits to H-1B workers on the same basis as it offers fringe benefits to U.S. workers. The public was invited to comment on the proposed rule, including the information collection requirements noted below. In addition, pursuant to the Paperwork Reduction Act of 1990, DOL submitted a paperwork package to the Office of Management and Budget (OMB), requesting review and approval of the information collection requirements included in the proposed rule. Since publication of the NPRM, additional amendments to the H-1B provisions were enacted by the American Competitiveness in the Twenty- first Century Act of 2000 (Pub. L. 106-313, 114 Stat. 1251, October 17, 2000), the Immigration and Nationality Act--Amendments (Pub. L. 106- 311, 114 Stat. 1247, October 17, 2000), and section 401 of the Visa Waiver Permanent Program Act (Pub. L. 106-396, 114 Stat. 1637, October 30, 2000) (collectively, the October 2000 Amendments). Most pertinent to these regulations were provisions that raised the ceiling on the number of H-1B visas that may be issued and extended the [[Page 80111]] period of effectiveness of the additional attestations applicable only to H-1B-dependent employers and willful violators. Comments were received from members of Congress, OMB, law firms, information technology industry associations, other industry associations, information technology firms, research firms, other employers of H-1B workers, Federal agencies and individuals. Commenters questioned DOL authority under the ACWIA and/or the Immigration and Nationality Act to impose the paperwork requirements contained in the proposed rule. Further, commenters questioned the DOL burden estimates for these information collections, indicating that the estimates were much too low. Many commenters contended DOL should only require the production of records in an investigation context. One commenter suggested for clarity that DOL provide a check list for H-1B employers indicating which records must be kept, which records are required by other statutes or regulations and where these records must be kept. Many commenters have fundamental misunderstandings of the nature of the reporting and disclosure requirements proposed in the NPRM. The Department has made every effort in the NPRM and in the Interim Final Rule to limit recordkeeping requirements to documents which are necessary for the Department to ensure compliance, and to documents which are already required by other statutes and regulations or would ordinarily be kept by a prudent businessperson. As a general matter, when reviewing the recordkeeping and disclosure obligations set forth in the regulations, employers should be aware that the regulations distinguish between a requirement to ``preserve'' or ``retain'' records if they otherwise exist, and a requirement to ``maintain'' records whether or not they already exist. A requirement that employers retain, for example, ``any'' documentation on a particular subject requires only that any such documents be retained if they otherwise exist, but does not require creation of any documents. In addition, the Department points out that where the regulations do not explicitly require public access, the records may be kept in the employer's files in any manner desired; they do not need to be segregated by labor condition application (LCA) or establishment and do not need to be segregated from the records of non-H-1B workers, provided they are promptly made available to the Department upon request in the conduct of an investigation. The Department considers it important to require that such records be maintained, as in other enforcement programs, so that in the event of an investigation, the Department is able to determine compliance or, in the event of violations, to determine the nature and extent of the violations. This can only be accomplished with adequate, accurate records since it is only the employer who is in a position to know and produce the most probative underlying facts. See Anderson v. Mt. Clemens Pottery Co., 328 U.S. 680, 687 (1946). In addition, in the regulations, the Department has limited the documents that must be disclosed to the public to those which the Department has concluded are necessary for a member of the public to be able to determine the employer's obligations and the general contours of how it will comply with its attestation obligations. The regulations on public access files do not require that there be a separate public access file for each LCA or for each worker. Thus, for example, an employer might choose to keep a single public access file with one copy of each of the required documents which are applicable to all LCAs (such as the description of the employer's pay system), and separately clip together those documents which are specific to each LCA. Nothing in the ACWIA suggests that it intends to deny the Department the usual authority to require recordkeeping as a means of ensuring compliance with an employer's statutory obligations. To the contrary, Section 212(n)(1) specifically requires employers to make the LCA ``and such accompanying documents as are necessary'' available for public examination. The Department believes that this provision clearly permits the Department to determine what documents must be created or retained by employers to support the LCA. In the absence of such records, the Department is unable to ascertain whether an employer in fact is in compliance or the extent of violations. In an effort to fully educate the public regarding the H-1B program and its requirements (including paperwork), DOL intends to prepare and make available pamphlets, fact sheets and a small business compliance guide. Further compliance assistance material will be made available on the DOL website. See Section IV.B, below, for an extensive discussion of this public outreach effort. The following is a brief discussion of the paperwork requirements contained in the proposed rule, the public comments on those requirements, the DOL response and the paperwork requirements imposed by this interim final rule. A much more extensive discussion of the issues, including the paperwork requirements, is contained in Section IV of the preamble. A. Labor Condition Application (Sec. 655.700) The process of protecting U.S. workers begins with a requirement that employers file a labor condition application (LCA) (Form ETA 9035) with the Department. In this application the employer is required to attest: (1) That it will pay H-1B aliens prevailing wages or actual wages, whichever are greater--including, pursuant to the ACWIA, the requirement to pay for certain nonproductive time and to provide benefits on the same basis as they are provided to U.S. workers; (2) that it will provide working conditions that will not adversely affect the working conditions of U.S. workers similarly employed; (3) that there is no strike or lockout at the place of employment; and (4) that it has publicly notified the bargaining representative or, if there is no bargaining representative, the employees, by posting at the place of employment or by electronic notification--and will provide copies of the LCA to each H-1B nonimmigrant employed under the LCA. In addition, the employer must provide the information required in the application about the number of aliens sought, occupational classification, wage rate, the prevailing wage rate and the source of the wage rate, and period of employment. Pursuant to the ACWIA, additional attestation requirements become applicable to H-1B-dependent employers and willful violators after promulgation of these regulations. This form, currently approved by OMB under OMB No. 1205-0310, was revised in the NPRM to identify H-1B dependent employers and provide for their attestation to the new requirements. The ACWIA increased the number of H-1B nonimmigrants from 65,000 to 115,000 in fiscal years 1999 and 2000 and to 107,500 in fiscal year 2002. Besides the increase in LCAs filed for these additional workers, by regulation H-1B-dependent employers are required to file new LCAs if they wish to file petitions for new H-1B nonimmigrants or to seek extensions of status for existing workers. The Department estimated in the proposal that 249,500 LCAs are filed annually by 50,000 H-1B employers (dependent and nondependent). The only added LCA burden proposed in the NPRM was for H-1B-dependent employers and willful violators to indicate on the LCA their status and their agreement to the [[Page 80112]] additional attestation requirements. (The time required for an estimated 50 H-1B employers to make the mathematical calculation to determine if they must make the additional attestations required of an H-1B employer is separately set out in C. of this section, below.) Since it was estimated that only 50 H-1B employers will find it necessary to make this calculation, out of a total of 50,000 H-1B employers, the estimate of time necessary to complete the form remained at 1 hour. Total annual burden was estimated at 249,500 hours. Since promulgation of the NPRM, the 2000 Amendments to the INA further increase the ceiling on the number of H-1B visas that may be issued annually for 2001, 2002 and 2003, to 195,000 annually, with an additional unspecified number who may be admitted if they will be employed by a school, a related non-profit entity, a State or local government research organization, or a nonprofit research organization. Commenters generally objected to the one hour estimate for completing the LCA, pointing out that the revised LCA is four pages long, whereas the current LCA is only one page for an estimated burden of one and one-quarter hour per LCA. OMB suggested asked whether the conditions in a, b and c in section 8 capture the requirements for H-1B dependent employers. They also suggested amending the end of the sentence following the second box to read ``* * * unless the exemption requirement in the NOTE below is met.'' A commenter stated that DOL had failed to consider that many employers will now be forced to file two LCAs where previously they only filed one. Several of its member employers who previously filed an LCA for multiple openings indicated that they may file separate LCAs for each opening rather than take the risk that of INS making a determination that one H-1B nonimmigrant is not exempt, thus invalidating the entire LCA. As discussed in Section IV.B.4 below, the ETA Form 9035 has been amended to provide that every employer is required to indicate whether it is or is not H-1B-dependent or a willful violator. Since all employers are required to determine whether or not they are H-1B dependent--although for most employers, as discussed below, their status will be readily apparent and no actual computation will be necessary--the additional box for non-dependent employers should require no additional time. There is no other information required which is not contained on the current form other than to check a box indicating the agreement of H-1B-dependent employers and willful violators to the additional attestation requirements. The longer form is not due to the requirement to furnish additional information, but to the new format required for the FAXback, which is designed to decrease significantly the processing time. See Section IV.5, below. The Department also notes that the 1\1/4\ hour estimate on the current ETA Form 9035 includes the 15 minutes estimated to file a complaint with the Wage and Hour Division Upon review, the Department sees no reason to change its estimate of an average of one hour per form, including both reading the instructions and filling out the form (estimated to take no more than one-half hour per form), as well as taking the actions that are subsumed in filling out the form (obtain the prevailing wage and providing notice). Based upon current data, and considering the regulatory change deleting the necessity for filing a new LCA when an employer's corporate identity changes (see B. of this section, below) as well as the requirement that H-1B-dependent employers with current LCAs file new LCAs if they wish to file new H-1B petitions or requests for extension of status, DOL estimates that 637,000 LCAs will be submitted annually by 63,500 H-1B employers (dependent and nondependent). Total annual burden for the LCA is estimated to be 637,000 hours (637,000 LCAs x 1 hour). B. Documentation of Corporate Identity (Sec. 655.760) Currently, the regulatory requirement is that a new LCA must be filed when an employer's corporate identity changes and a new Employer Identification Number (EIN) is obtained. Under the proposed rule, an employer who merely changes corporate identity through acquisition or spin-off could merely document the change in the public file (including an express acknowledgment of all LCA obligations on the part of the successor entity), provided it satisfied the Internal Revenue Code definition of a single employer. The proposed regulation was designed to eliminate a burden on businesses to file a new LCA, while at the same time ensuring that the public is aware of the changes and that the employer will continue to follow its LCA obligations. It was estimated in the proposal that 500 H-1B employers would be required to file the subject documentation annually. It was estimated that the recording and filing of each such document would take 15 minutes for a total annual burden of 125 hours. One commenter asked how DOL's rulemaking affected the INS interpretation that any ``material change in employment'' necessitates the filing of an amended petition. Another commenter asked what opinion an employer is to follow when current DOL opinion is that any change to an approved LCA requires an amendment to the H-1B petition and the view of INS is that a change in company name or EIN does not require a new LCA, just that the change be documented at the time of amendment or extension. Another commenter stated that the burden for this requirement is significantly higher than DOL estimated. Upon reconsideration, DOL's Interim Final Rule provides that a new LCA will not be required merely because a corporate reorganization results in a change of corporate identity, regardless of whether there is a change in the EIN and regardless of whether the IRS definition of single employer is satisfied, provided that the successor entity, prior to the continued employment of the H-1B nonimmigrant, agrees to assume the predecessor entity's obligations and liabilities under the LCA. The agreement to comply with the LCA for the future and to any liability of the predecessor under the LCA must be documented with a memorandum in the public access file. With these changes, and based on the Department's experience, it is now estimated that 1000 H-1B employers (an increase from the 500 employers estimated in the NPRM) will be required to file the documentation annually and that the recording and filing of each such document will take approximately 30 minutes for a total annual burden of 500 hours. The Department also estimates that employers who file this memorandum will file 10,000 fewer LCAs, for a net saving of 9,500 hours. INS requirements for the filing of an amended petition are separate from DOL requirements for the filing of LCAs. C. Determination of H-1B Dependency (Sec. 655.736) An H-1B employer must calculate the ratio between its H-1B workers and the number of full-time equivalent employees (FTEs) to determine whether it meets the statutory definition of an H-1B-dependent employer (8 U.S.C. 1182 (n)(3)(A)). The NPRM provided that when it is a close question, the determination would ordinarily be made by examination of an employer's quarterly tax statement and last payroll (or last quarter of payrolls if more [[Page 80113]] representative) or other evidence as to average hours worked by part- time employees to aggregate their hours into FTEs, together with a count of the number of workers under H-1B petitions. Documentation of this determination would be required where non-dependent status is not readily apparent and a mathematical determination must be made. A copy of this determination would be placed in the public disclosure file. In addition, if an employer changed from dependent to non-dependent status, or vice-versa, a simple statement of the change in status would be placed in the public disclosure file. The NPRM explained that documentation of a determination of H-1B dependency where it is a close question is necessary to determine employer compliance with H-1B requirements, and to advise the public of an employer's status. It was estimated in the proposal that approximately 50 H-1B employers would need to make the determination with 25 employers who are found not to be dependent employers would be required to document this determination annually. The making and documentation of each such determination was estimated to take approximately 15 minutes, and occur at least twice annually for a total annual burden of 12.5 hours. Several commenters expressed the view that the DOL burden estimate for this requirement was severely underestimated. They remarked that large employers who hire H-1B employees will have to create systems of verification of H-1B dependency and that the determination will be difficult where employees are located in multiple locations and departments and the data needed to make the determination are maintained in different databases. Some commenters questioned the connection DOL made between the use of blanket LCAs and the likelihood of H-1B dependency and how frequently the determination would need to be made. Some also commented that it appeared that whenever the determination is made, a copy of the calculation must be placed in the public access file, making it a requirement for all H-1B employers, not just those who are borderline H-1B dependent. OMB commented that the 15-minute burden for the dependency determination seemed low and asked if the estimate just includes the assurance (how it is written) or does it also include documentation of the assurance. Having taken into consideration all of the comments pertaining to the determination of dependency status, DOL has decided modification these requirements is appropriate to achieve the purposes of the ACWIA and avoid unnecessary burden on employers. First, the Interim Final Rule provides that all employers must retain copies of the I-129 petitions or requests for extensions of status filed with INS. These documents are critical to several provisions in the regulations, including in particular the determination of dependency and the number of hours that must be compensated if employees are ``benched.'' The Department believes that prudent businessmen would retain copies of these documents in any event. (See also the discussion in D. of this section, below.) The Interim Final Rule also significantly reduces the burden to employers in making the computations of dependency. The Rule will permit employers to use a ``snap shot'' test to determine if dependency status is readily apparent and requires a full computation only if the number of H-1B workers exceeds 15 percent of the total number of full- time workers of the employer. Furthermore, the Rule provides employers an option of considering all part-time workers to be one-half FTE, rather than make the full computation. If the full computation (where required because the dependency status is not readily apparent) indicates that the employer is not H-1B dependent, the employer must retain a copy of this computation. Further, the employer must retain a copy of the full computation in specified circumstances which the Department believes will very rarely occur. The full computation must be maintained if the employer changes status from dependent to non- dependent. If the employer uses the Internal Revenue Code single employer test to determine dependency, it must maintain records documenting what entities are included in the single employer, as well as the computation performed, showing the number of workers employed by each entity who is included in the calculation. Finally, if the employer includes workers who do not appear on the payroll, a record of the computation must be kept. The Department has concluded that the computations or summary of the computations need not be kept in the public access file. Although DOL has made several changes to simplify the determination of dependency status and its documentation, upon reconsideration DOL has increased its estimate of burden from 15 to 30 minutes, thus increasing the annual burden for an estimated 25 employers who must make and document such calculations twice annually from 12.5 to 25 hours. The Department also estimates that no more than 5 percent of employers will be required to retain copies of H-1B petitions and extensions who do not currently retain these documents, for an average of 3 minutes per petition, and a total of 159 hours (3,175 employers x 3 minutes 60). Total annual burden for this item is estimated to be 184 hours. D. List of Exempt H-1B Employees in Public Access File (Sec. 655.737(a)(1)) The ACWIA provisions regarding non-displacement and recruitment of U.S. workers do not apply where the LCA is used only for petitions for exempt H-1B workers. The NPRM provided that where the INS determines a worker is exempt, employers would be required to maintain a copy of such documentation in the public access file. Determinations as to whether or not H-1B workers meet the education requirements to be classified as exempt H-1B nonimmigrants would be made initially by the INS in the course of adjudicating the petitions filed on behalf of H-1B nonimmigrants by dependent employers. In the event of an investigation, it was anticipated that considerable weight would be given to the INS determination that H-1B nonimmigrants were exempt, based on the educational attainments of the workers, since INS has considerable experience in evaluating the educational qualifications of aliens. Retention of copies of such determinations would aid DOL in determining compliance with the H-1B requirements and provide the public with notice as well. It was estimated in the proposal that 28,125 such documents would need to be filed annually. Each such filing would take approximately one minute for an annual burden of approximately 468.8 hours. One commenter indicated that the one minute to physically complete the form may be correct but that the estimate ignores the analysis and review required to determine if they are exempt. Another commenter asked what documentation must be copied and maintained in the file, i.e., would INS issue a separate determination or would Form I-797, Notice of Approval of H-1B Petition suffice? They also believed it was unclear how DOL estimated only 28,125 documents would be filed annually when the number of H-1B petition approvals for the current fiscal year is 115,000. On further consideration, because of privacy considerations, DOL has concluded that the H-1B petitions with the INS determinations of workers' exempt status need not be included in the public access file. However, DOL [[Page 80114]] believes the public should know which workers are not covered by the new attestation elements so they can challenge a determination of exempt status where they believe the basis for the exemption is invalid. Therefore, under the interim final rule employers will be required to include in their public access file a list of the H-1B nonimmigrants supported by any LCA attesting that it will be used only for exempt workers, or in the alternative, a statement that the employer employs only exempt H-1B workers. DOL estimates that each list or statement will take approximately 15 minutes and that 200 H-1B employers will prepare one such list or statement annually for a total burden of 50 hours. E. Record of Assurance of Non-displacement of U.S. Workers at Second Employer's Worksite (Sec. 655.738(e)) Section 212(n)(F)(ii) of the INA, 8 U.S.C. 1182(n)(F)(ii), prohibits an H-1B-dependent employer from placing H-1B nonimmigrant with another employer unless the dependent employer makes a bona fide inquiry as to the secondary employer's intent regarding displacement of U.S. workers by H-1B workers. The proposed regulation would require an employer seeking to place an H-1B nonimmigrant with another employer to secure and retain either a written assurance from the second employer, a contemporaneous written record of the second employer's oral statements regarding non-displacement, or a prohibition in the contract between the H-1B employer and the second employer. Pursuant to the ACWIA, an H-1B employer may be debarred for a secondary displacement ``only if the Secretary of Labor found that such placing employer * * * knew or had reason to know of such displacement at the time of the placement of the nonimmigrant with the other employer.'' Congress clearly intended that the employer make a reasonable inquiry and give due regard to available information. In order to assure that the purposes of the statute are achieved, the Department developed a regulatory provision to require that the H-1B employer make a reasonable effort to inquire about potential secondary displacement and to document those inquiries. It was estimated that approximately 150 employers would place H-1B nonimmigrants with secondary employers where assurances are required. It was estimated that each such assurance will take approximately 5 minutes and each such employer would obtain such assurances 5 times annually for an annual burden of 62.5 hours. Commenters stated that DOL grossly underestimated the amount of time necessary to persuade and obtain from the secondary employer the necessary assurances, create a verification form or revise a contract and the annual frequency of the assurances. Further, some commenters felt that DOL had failed to consider the additional burden on the secondary employer to document their compliance with the assurance. The paperwork burden estimate, properly, does not include the time necessary to persuade a secondary employer to provide such an assurance but does include the development of the verification form or contract clause and its execution. DOL believes that once the form or contract clause is created, this form or contract clause will be used uniformly for subsequent assurances making the average burden per occurrence minimal. There is no burden on the secondary employer to document its compliance with the assurance, since it is solely the responsibility of the primary H-1B employer to comply with the attestation that no U.S. worker will be displaced by an H-1B worker. DOL estimates an average burden of 10 minutes per attestation or statement, and that 150 H-1B employers will document such assurance 5 times annually, for a total annual burden of 125 hours. F. Offers of Employment to Displaced U.S. Workers (Sec. 655.738(e)) The ACWIA prohibits H-1B dependent employers and willful violators from hiring H-1B nonimmigrants if their doing so would displace similar U.S. workers from an essentially equivalent job in the same area of employment. The proposed regulations would require H-1B-dependent employers to keep certain documentation with respect to each former worker in the same locality and same occupation as any H-1B worker who left its employ in the period from 90 days before to 90 days after an employer's petition for an H-1B worker. For all such employees, the Department proposed that covered H-1B employers maintain the last-known mailing address, occupational title and job description, any documentation concerning the employee's experience and qualifications, and principal assignments. Further, the employer would be required to keep all documents concerning the departure of such employees and the terms of any offers of similar employment to such U.S. workers and responses to those offers. These records are necessary for the Department to determine whether the H-1B employer has displaced similar U.S. workers with H-1B nonimmigrants. The Department stated that no records need be created to comply with these requirements, since the Equal Employment Opportunity Commission (EEOC) already requires under its regulations that the records described above be maintained. Commenters stated that they were unaware of the EEOC regulation that required this documentation and requested that DOL recite rather than just refer to the EEOC regulations. As discussed in Section IV.F.8 below, commenters are generally correct that the EEOC regulation cited in the NPRM, 29 CFR 1620.14, does not establish a general requirement that employers create the records encompassed by the Department's displacement proposal. Rather, it requires an employer to preserve all personnel or employment records which the employer ``made or kept''. Furthermore, EEOC requires the preservation of the same or similar records under other statutes it administers, such as the Age Discrimination in Employment Act (ADEA). Under this Interim Final Regulation, DOL is not requiring employers to create any documents other than basic payroll information, with one noted exception. If the employer offers the U.S. worker another employment opportunity, and does not otherwise do so in writing, by the provisions of section 655.738(e)(1) of these regulations, the employer must document and retain the offer and the response to such offer. It is estimated that 10 H-1B employers will make such offers of employment 5 times annually (50) and that 5 of those offers and responses would not otherwise be committed to writing without this paperwork requirement. Each such documentation is estimated to take 30 minutes for a total annual burden of 2.5 hours. G. Documentation of U.S. Worker Recruitment (Sec. 655.739(i) Pursuant to the ACWIA, H-1B-dependent employers are required to make good faith efforts to recruit U.S. workers before hiring H-1B workers. Under the proposed regulations, H-1B-dependent employers would be required to retain documentation of the recruiting methods used, including the places and dates of the advertisements and postings or other recruitment method used, the content of the advertisements or postings, and the compensation terms. Further, the employer would be required to retain any documentation concerning consideration of applications of U.S. workers, such as copies of applications [[Page 80115]] and related documents, rating forms, job offers, etc. The proposed rule also would require the employer to place either documentation or a simple list of the places and dates of the advertisements and postings of other recruitment methods used. Comments were requested regarding how employers should determine industry-wide standards and make this determination available for public disclosure. The documentation noted above is necessary for the Department of Labor to determine whether the employer has made a good faith effort to recruit U.S. workers and for the public to be aware of the recruiting methods used. It was estimated that annually 200 H-1B dependent employers would need to document their good faith efforts to recruit U.S. workers. The filing of such records was estimated to take approximately twenty minutes per employer for an annual burden of approximately 66.7 hours. Commenters felt the burden for this item was underestimated, i.e., that DOL should recognize that employers file more than one LCA each year and that DOL should recite rather than just refer to the EEOC regulation requiring this documentation. As noted in F. above and as discussed at some length in Section IV.G.5 of the preamble, DOL believes that employers are required to preserve the records required under current EEOC requirements. With the exception of the list to be included in the public access file (and here too employers have the option of putting the actual records in the file), DOL is not requiring employers to create any documents, but rather to preserve those documents which are created or received. Further, DOL, upon further review, has determined that employers will not be required to maintain evidence of industry practice for recruitment. The only additional recordkeeping burden required by these regulation is that the public disclosure file contain a summary of the principal recruitment methods used and the time frames in which they were used. This recordkeeping requirement may be satisfied by creating a memorandum to the file or the filing of pertinent documents. It is estimated that 200 H-1B employers will file such documents or memorandum 5 times annually and that each recordkeeping will take 20 minutes, for an annual burden of approximately 333 hours. H. Documentation of Fringe Benefits (Sec. 655.731(b)) Pursuant to the ACWIA, all employers of H-1B workers are required to offer benefits to H-1B workers on the same basis and under the same criteria as offered to similarly employed U.S. workers. The proposed regulations would require employers to retain copies of all fringe benefit plans and summary plan descriptions, including all rules regarding eligibility and benefits, evidence of what benefits are actually provided to individual workers and how costs are shared between employers and employees. These records are necessary for the Department to determine whether the H-1B nonimmigrants are offered the same fringe benefits as similarly employed U.S. workers. Copies of most fringe benefit programs are required to be maintained by Internal Revenue Service and Pension and Welfare Benefits Administration regulations; thus there would not ordinarily be an additional recordkeeping burden from these requirements. The Department estimated that 2,500 employers would spend approximately 15 minutes each documenting unwritten plans, for an annual burden of 625 hours. The Department in the proposed rule also inquired as to whether it would be possible to require multinational employers to keep H-1B workers on ``home country'' benefit plans in lieu of those provided to U.S. workers and what records would need to be kept to demonstrate the value of the ``home-country'' benefits and those provided to U. S. workers. A commenter said that DOL should recite, rather than just refer to the PWBA and IRS regulations. Another commenter stated it was unclear whether in fact these regulations governing retention of benefits information meet the DOL requirements for the H-1B program, since the DOL regulations require specific documentation of the comparative benefits offered and received by H-1B employees and their U.S. counterparts, including the need to determine the appropriate comparison group and then require the maintenance of all the information in the public inspection file for each H-1B worker. Another comment stated that DOL has failed to consider the additional burden of comparing fringe benefits offered by similar employers in the area which DOL is proposing to require. Commenters questioned the need for the documentation of fringe benefits to be placed in each public access file, with others suggesting more flexibility in how the documentation should be provided. One commenter suggested that employers be allowed to select equivalent but different valued benefits as long as employers can show that all similarly situated workers were offered the same array of benefits. It is believed that almost all employers of H-1B workers would, absent the regulation, have already created an employee handbook or have a summary description plan required by ERISA regulations which would satisfy the H-1B regulatory requirement. The provision being considered to require a comparison of fringe benefits offered by similar employers in the area is not included in this interim final rule. DOL is not requiring that detailed records of fringe benefits be maintained in each public access file. These records may be kept in a master file or in any other manner the employer desires. The public access file need only contain a summary of the benefits offered to U.S. workers in the same occupation as H-1B workers, including a statement of how employees are differentiated, if at all. Ordinarily this would be satisfied with the employee handbook or summary description discussed above. Where an employer is providing home country benefits, the employer need only place a notation to that effect in the public access file. There are an estimated 10 percent of H-1B employers, or 6,350 who provide fringe benefits, such as bonuses, vacations and holidays, not required by ERISA regulations to be documented. It is estimated to document these plans would take 15 minutes per employer, for an annual burden of 1,588 hours (6,350 x 15 minutes). It is further estimated that 25 percent of H-1B employers (15,875) are multinational employers and that a note to the file that these workers receive ``home country'' benefits would take 5 minutes per employer for an annual burden of 1,323 hours. The total estimated burden for this item is 2,911 hours. I. Wage Recordkeeping Requirements Applicable to Employers of H-1B Nonimmigrants The Department republished and asked for comment on several provisions of the December 20, 1994 Final Rule (59 FR 65646) which were published for notice and comment on October 31, 1995 (60 FR 55339). Existing regulations require all H-1B employers to document their actual wage system to be applied to the H-1B nonimmigrants and U.S. workers. They are also required to keep payroll records for non-FLSA exempt H-1B workers and other employees for the specific employment in question. The proposed rule would decrease the burden on employers of keeping hourly pay records for U.S. workers, requiring such records only if either the worker is not [[Page 80116]] paid on a salary basis, or the actual wage is stated as an hourly wage. For H-1B workers, such records must also be kept if the prevailing wage is expressed as an hourly rate. The statute requires that the employer pay H-1B nonimmigrants the higher of the actual or prevailing wage. The Department explained that in order to determine if the employer is paying the required wage, it must be able to ascertain the system an employer uses to determine the wages of non-H-1B workers. The Department also stated that it is essential to require the employer to maintain payroll records for the employer's employees in the specific employment in question at the place of employment to ensure that H-1B nonimmigrants are being paid at least the actual wage being paid to non-H-1B workers or the prevailing wage, whichever is higher. The Department estimated that approximately 50,000 employers employ H-1B nonimmigrants. The documentation would have to be done only one time for each employer. Hourly pay records would have to be prepared with respect to all affected employees each pay period. The Department estimated that the public burden wold be approximately 1 hour per employer per year to document the actual wage system for a total burden to the regulated community of 50,000 hours in a year. The payroll recordkeeping requirements are virtually the same as those required by the Fair Labor Standards Act (FLSA) and any burden required is subsumed in the OMB Approval No. 1215-0017 for those regulations at 29 CFR Parts 516, except with respect to records of hours worked for exempt employees. There would be no burden for U.S. workers since as a practical matter, hours worked records would be required for U.S. workers only if they are not exempt from FLSA, or if they are exempt but paid on an hourly basis (certain computer professionals), and therefore would keep hourly records in any event. The Department estimates that 55,000 H-1B workers will be paid on a salary basis. Hours worked records would be required for these workers only if the prevailing wage is expressed as an hourly rate--estimated to 17 percent of all cases. The Department estimated a burden of 2.5 hours per worker per year, for 9,350 workers and a total of 23,375 hours. Several commenters stated that DOL had grossly underestimated the burden of documenting the objective wage system. Some indicated that it was ludicrous to estimate that the documentation is done only once, since wage systems continually change, documentation will need be done, at a minimum, each time a new LCA is prepared and employers do not hire H-1B nonimmigrants only for one position in the organization. Thus, DOL must calculate how many different job categories are filled by H-1B nonimmigrants on average for each employer to estimate how many times the burden of documenting the objective wage system occurs annually. Further, the documentation must be sufficiently detailed to allow a third party to determine the actual wage, making the burden higher than estimated. Some commented that the proposed regulation requires the actual wage be determined and documented anew for each H-B hire, along with periodic adjustments to the actual wage system. The Department has deleted the provisions suggesting that the employer's wage system must be objective, as well as the statement that it must be described in the public disclosure file with detail sufficient for a third party to determine the actual wage rate for an H-1B nonimmigrant. As stated above, the requirement that a description of the actual wage system be included in the public access file is already contained in the regulations at section 655.760(a)(3). Therefore these regulations create no additional burden for this requirement. Some commenters stated that while DOL estimated that only 17 percent of the prevailing wages provided to employers by State Employment Security Agencies (SESAs) are expressed as hourly rates, their experience was that SESAs regularly provides employers and attorneys with the prevailing wage stated as an hourly rate. With respect to the concern expressed that SESA more frequently issues hourly rates, the modification to section 655.731(a)(2) in the interim final rule will provide that employer shall convert the prevailing wage determination into the form which accurately reflects the wages which it will pay. The Department has also concluded that a revision of the regulation is appropriate to remove the requirement that the employer keep hourly wage records for its full-time H-1B employees paid on a salary basis. The regulation continues to require employers to keep hours worked records for employees who are not paid on a salary basis and for part- time H-1B workers, regardless of how paid. The additional burden of keeping records for salaried H-1B workers who are exempt from the FLSA is estimated at 2.5 hours per worker for 10,500 workers (1.5 percent of total H-1B workers), for a total annual burden of 26,250 hours. J. Information Form Alleging H-1B Violations The ACWIA requires DOL to develop a procedure so that a person, other than an aggrieved party, can provide, in writing on a form developed by DOL, information alleging H-1B program violations. The Department proposes that a single form be used by any party alleging violations, to the Wage and Hour Division of the U.S. Department of Labor, whether a complainant or another source. The H-1B Nonimmigrant Information Form, WH-4, is included in this Interim Final Rule for public review and comment. It is estimated that 200 such responses will be received annually and that each response will take approximately 20 minutes, for a total burden of 67 hours. Total Annual Hours Burden for all Information Collections--667,423 Hours Retention of Records: The current regulations provide at section 655.760 that copies of the LCAs and its documentation are to be kept for a period of one year beyond the end of the period of employment specified on the LCA or one year from the date the LCA was withdrawn, except that if an enforcement action is commenced, these records must be kept until the enforcement procedure is completed as set forth in part 655, subpart I. The payroll records for the H-1B employees and others employees in the same occupational classification must be retained for a period of three years from the date(s) of the creation of the record(s), except that if an enforcement proceeding is commenced, all payroll records shall be retained until the enforcement proceeding is completed. These record retention requirements have been approved by OMB under OMB No. 1205-0310. After consideration of comments raised in response to the NPRM, the Department has clarified the record retention requirements to provide that where there is no enforcement action, the employer shall retain required records for a period of one year beyond the last date on which any H-1B nonimmigrant is employed under the labor condition application or, if no nonimmigrants were employed under the labor condition application, one year from the date the labor condition application expired or was withdrawn. H-1B employers may be from a wide variety of industries. Salaries for employers and/or their employees who perform the reporting and [[Page 80117]] recordkeeping functions required by this regulation may range from several hundred dollars to several hundred thousand dollars where the corporate executive office of a large company performs some or all of these functions themselves. Absent specific wage data regarding such employers and employees, respondent costs were estimated in the proposed rule at $25 an hour. Total annual respondent hour costs for all information collections were estimated to be $8,105,887.50 ($25.00 x 324,235.5 hours). Some commenters questioned the $25 per hour estimate for respondent costs, indicating that in order to comply with the information requirements, H-1B employers must employ high-level compensation professionals and human resource professionals. The Department recognizes that some employers may employ highly-paid professionals to advise them on how to comply with the H-1B program requirements. However, it is believed that such a need will be short-lived and that once a system is in place, compliance can be maintained without this highly paid professional assistance. The $25 an hour respondent cost is an average cost, which recognizes higher initial cost to effect compliance, as well as the low cost of performing the clerical filing functions. Further, as noted above, in addition to the guidance provided in this regulation and its preamble, the Department intends to provide non-technical guidance printed material and information in electronic format which should greatly assist employers and employees in understanding the H-1B program requirements. Total annual respondent hour costs for all information collections are estimated at $16,685,575 ($25.00 x 667,423). The paperwork requirements discussed above will not become effective until OMB has reviewed and approved these requirements and assigned an OMB approval number. II. Background On November 29, 1990, the Immigration and Nationality Act was amended by the Immigration Act of 1990 (IMMACT 90) (Pub. L. 101-649, 104 Stat. 4978) to create the ``H-1B visa program'' for the temporary employment in the United States (U.S.) of nonimmigrants in ``specialty occupations'' and as ``fashion models of distinguished merit and ability.'' The H-1B provisions of the INA were amended on December 12, 1991, by the Miscellaneous and Technical Immigration and Naturalization Amendments of 1991 (MTINA) (Pub. L. 102-232, 105 Stat. 1733). Further amendments were made to the H-1B provisions of the INA on October 21, 1998, by enactment of the American Competitiveness and Workforce Improvement Act (ACWIA) (Title IV of Pub. L. 105-277, 112 Stat. 2681). In addition, the H-1B provisions of the INA were amended in October, 2000 by enactment of the American Competitiveness in the Twenty-first Century Act of 2000 (Pub. L. 106-313, 114 Stat. 1251, October 17, 2000), the Immigration and Nationality Act--Amendments (Pub. L. 106- 311, 114 Stat. 1247, October 17, 2000), and section 401 of the Visa Waiver Permanent Program Act (Pub. L. 106-396, 114 Stat. 1637, October 30, 2000) (collectively, the October 2000 Amendments). These cumulative amendments of the INA assigned certain responsibility to the Department of Labor (Department or DOL) for implementing several provisions of the Act relating to the temporary employment of certain nonimmigrants. The H-1B provisions of the INA govern the temporary entry of foreign ``professionals'' to work in ``specialty occupations'' in the United States under H-1B visas. 8 U.S.C. 1101(a)(15)(H)(i)(b), 1182(n), and 1184(c). The H-1B category of specialty occupations consists of occupations requiring the theoretical and practical application of a body of highly specialized knowledge and the attainment of a Bachelor's or higher degree in the specific specialty as a minimum for entry into the occupation in the United States. 8 U.S.C. 1184(i)(1). In addition, an H-1B nonimmigrant in a specialty occupation must possess full State licensure to practice in the occupation (if required), completion of the required degree, or experience equivalent to the degree and recognition of expertise in the specialty. 8 U.S.C. 1184(i)(2). The category of ``fashion model'' requires that the nonimmigrant be of distinguished merit and ability. 8 U.S.C. 1101(a)(15)(H)(i)(b). A. Changes Made by the ACWIA and the October 2000 Amendments The ACWIA made numerous significant changes in the H-1B provisions. One was the temporary increase in the maximum number of H-1B visas over the three fiscal years following ACWIA's enactment: For fiscal years 1999 and 2000, the cap would be 115,000; for fiscal year 2001, the cap would be 107,500; and for fiscal year 2002 (and thereafter), the cap would return to the original 65,000. Another significant change was the imposition of additional attestation requirements for certain employers to provide better protections to U.S. workers. The additional attestation requirements apply to ``H-1B-dependent employers'' and to employers who have been found to have committed a willful failure or misrepresentation with respect to the H-1B requirements (hereafter referred to as ``willful violators''). H-1B-dependent employers and willful violators must attest that they: (1) Have not displaced and will not displace a U.S. worker within the period beginning 90 days before and ending 90 days after the filing of an H-1B petition; (2) will not place an H-1B worker with another employer with indicia of an employment relationship without making an inquiry to assure displacement has not and will not take place within the period beginning 90 days before and ending 90 days after the placement; and (3) have taken good faith steps to recruit U.S. workers for the job for which the H-1B workers are sought, and will offer the job to any equally or better qualified U.S. worker. The recruitment provision does not apply to an LCA for an H-1B worker who is ``exceptional,'' an ``outstanding professor or researcher,'' or a ``multinational manager or executive'' within the meaning of section 203(b)(1) of the INA. The ACWIA specified that both the displacement and recruitment/hiring protections become effective upon the date of the Department's final regulation and apply only to LCAs filed before October 1, 2001. An H- 1B-dependent employer or willful violator filing an LCA which will be used only for ``exempt'' H-1B workers is not required to comply with the new attestation requirements for that LCA. The ACWIA also instituted a filing fee of $500, to be collected by INS, for initial petitions and first extensions filed on or after December 1, 1998, and before October 1, 2001. Institutions of higher education and related or affiliated nonprofit entities, nonprofit research organizations, and Governmental research organizations are exempt from the new fee. The fees are to be used for job training, low- income scholarships, and program administration/enforcement. The ACWIA included other generally applicable worker protections, specifically: whistleblower protection, prohibitions against reimbursement of the $500 filing fee and against penalizing an H-1B worker who terminates employment prior to a date agreed with the employer, and a requirement that the employer pay wages during nonproductive time if such time is not due to reasons occasioned by the worker. The ACWIA [[Page 80118]] also required employers to offer H-1B workers fringe benefits on the same basis and in accordance with the same criteria as U.S. workers. The ACWIA specified new civil money penalties ranging from $1,000 to $35,000 per violation, along with debarment. New investigative procedures were created, authorizing the Department to conduct ``random'' investigations of willful violators during the five-year period after the finding of such violation, and establishing an alternative investigation protocol based on information indicating potential violations obtained from sources other than aggrieved parties. Enforcement of the requirement that employers hire U.S. workers if they are equally or better qualified than the H-1B workers is carried out by the Attorney General through arbitration. The ACWIA mandated a particular method of computation of the local prevailing wage for purposes of the requirements of the H-1B program and the permanent immigrant worker program with respect to employees of institutions of higher education and related or affiliated nonprofit entities, nonprofit research organizations, and Governmental research organizations. Under the ACWIA provision, the prevailing wage level is to take into account only employees at such institutions and organizations. The ACWIA became law on October 21, 1998. With one exception, its provisions took effect at that time, and apply both to existing LCAs and to LCAs filed in the future. Pursuant to section 412(d) of the ACWIA and section 212(n)(1)(E)(ii) of the INA as amended by the ACWIA, 8 U.S.C. 1182(n)(1)(E)(ii), the special attestation provisions regarding displacement and recruitment are applicable only to LCAs filed by H-1B-dependent employers and willful violators on or after the date this Interim Final Rule becomes effective and until October 21, 2001. In addition, section 415(b) of the ACWIA provided that the amendments to section 212(p) of the INA, 8 U.S.C. 1182(p)--relating to computing the prevailing wage level for employees of an institution of higher education or a related or affiliated nonprofit entity, for employees of a nonprofit research organization or Governmental research organization, or for professional athletes--apply to prevailing wage computations for LCAs filed before October 21, 1998, ``but only to the extent that the computation is subject to an administrative or judicial determination that is not final as of such date.'' Therefore, the regulations in parts 655 and 656 to implement section 212(p) apply retroactively to any prevailing wage determinations thereunder which were not final as of October 21, 1998. Two other ACWIA's provisions contained temporal qualifications, relating to the Department's authority to conduct random investigations and other source investigations (INA, sections 212(n)(2)(F), 212(n)(2)(G), respectively). The Act specified that the Department's authority, pursuant to section 212(n)(2)(F) of the INA as amended by the ACWIA, 8 U.S.C. 1182(n)(2)(F), to conduct random investigations of employers who have committed a willful failure to meet a condition of their LCAs or who have made a willful misrepresentation of material fact applies only where such a finding has been made by the Secretary on or after October 21, 1998. The Act also specified that the Department's authority, pursuant to section 212(n)(2)(G), 8 U.S.C. 1182(n)(2)(G), to conduct investigations based on credible information from a source other than an aggrieved person would ``sunset,'' i.e., expire, on September 30, 2001. The October 2000 Amendments made substantial increases in the numbers of H-1B visas available for the employment of nonimmigrants: 195,000 each year for fiscal years 2001, 2002, and 2003 (with the number thereafter to revert to the original 65,000 per fiscal year); an unspecified additional number for fiscal year 1999 to cover nonimmigrants issued visas above the authorized number for that year; an unspecified additional number for fiscal year 2000 to cover petitions filed before September 1, 2000; and an unlimited number for nonimmigrants employed by institutions of higher education, by their related or affiliated nonprofit entities, by nonprofit research organizations, or by governmental research organizations (i.e., visas for employees of such entities are not counted against the annual limits). The Amendments extended the effective periods for two ACWIA provisions: The additional attestation elements for H-1B-dependent employers and willful violator employers were extended until October 1, 2003; the Department's authority to conduct investigations based on sources other than aggrieved parties was extended through September 30, 2003. In addition, the Amendments created a ``portability'' option for H-1B nonimmigrants, by authorizing their change of employers (from one H-1B employer to another) ``upon the filing by the prospective employer of a new petition on behalf of such nonimmigrant'' (i.e., eliminating the need to await the INS adjudication of the petition). Further, the Amendments authorized the extension of H-1B status for nonimmigrants in cases of delayed INS adjudications of petitions for employment-based immigration or applications for adjustment of status for permanent residence; the extensions of H-1B status are to be made by the INS in one-year increments. The Amendments doubled the ACWIA-created petition fee (from $500 to $1,000) and extended the effective period of the fee provision to October 1, 2003. The Amendments broadened the ACWIA's exemption of certain employers from payment of the filing fee (to include nonprofit entities engaging in established curriculum-related clinical training of students registered at such institutions). In addition, the Amendments made some changes in the ACWIA allocations of fee monies for various training programs, increased the ACWIA allocation of fee monies to the INS for processing of LCAs, and reduced the ACWIA allocation of fee monies to the Department for processing and enforcement of LCAs (i.e., reduced from 6 percent to 5 percent, to be divided equally between processing and enforcement). Finally, the Amendments directed that an amended H-1B petition was not required to be filed by an employer that was involved in a corporate restructuring, where the nonimmigrant's terms and conditions of employment remained the same. The Department notes that the ACWIA was the product of extensive negotiations between the Administration and the House and the Senate. See 144 Cong. Rec. H8584 (Sept. 24, 1998); 144. Cong. Rec. S10877 (Sept. 24, 1998). Earlier in the year both the House and the Senate had issued very different bills to address the H-1B program (see S. Rep. No. 105-186, 105th Cong., 2d Sess. (1998); H.R. Rep. No. 105-657, 105th Cong., 2d Sess. (1998)). The resulting legislation was a compromise, and there was no conference committee report or joint statement by the negotiators that would provide clear legislative history as to its intent. Although Senator Abraham and Congressman Lamar Smith, as well as other individual Congressman, made remarks in the Congressional Record, their views as to the meaning and effect of the legislation are dramatically different. The Department further notes that the October 2000 Amendments were also the product of extensive negotiations, but that there is very little legislative history concerning the limited [[Page 80119]] provisions that were actually enacted by Congress. Keeping in mind the difficulty with construing legislation under these circumstances, the Department has--in the Preamble of this Interim Final Rule--cited to the legislative history of ACWIA in both the House and the Senate, and to the extensive remarks of both Senator Abraham and Congressman Smith. B. Summary of Comments on the January 5, 1999 NPRM To obtain public input to assist in the development of interim final regulations, the Department published a Notice of Proposed Rulemaking (NPRM) and invited public comment in the Federal Register on January 5, 1999. The NPRM also stated that the Department was re- publishing for notice and further comment certain provisions of the Final Rule promulgated in December 1994. These provisions had been proposed for comment on October 31, 1995, during the pendency of the litigation in National Association of Manufacturers v. Reich, 1996 WL 420868 (D.D.C. 1996) (NAM), which resulted in an injunction against the Department's enforcement of some of the provisions on Administrative Procedure Act (APA) procedural grounds. In addition, the Department sought comment on a number of interpretive issues arising under the existing regulations, set forth in proposed Appendix B. The thirty-day comment period set forth in the January 5, 1999 NPRM was extended until February 19, 1999. The Department has, in this Interim Final Rule, carefully considered comments received in response to the October 31, 1995 Proposed Rule in conjunction with the comments received in response to the January 5, 1999 NPRM. The 1995 Proposed Rule elicited comments from 13 commenters, including one from a trade association, one from an association representing immigration attorneys, one from an association representing firms which provide international personnel to American businesses, five from information technology companies, one from an accounting and auditing firm, two from universities and two from law firms. The proposals which then elicited the greatest number of comments concerned the actual wage system (Appendix A), workplace notice, the 90-day short-term placement option for H-1B workers who move to worksite(s) not covered by LCA(s), and the use of the Government per diem schedule for travel expenses for those workers. All but two of these commenters objected to the Department's proposal that the actual wage be based on a system utilizing objective criteria. Seven of the commenters objected to the Department's proposals on the posting of notices at worksites not controlled by the employer, while eight of the commenters objected to the Department's proposals with regard to the 90-day option. Five of the commenters objected to the use of the Government per diem schedule for reimbursement of travel expenses under this option. The Department received 92 comments in response to the January 5, 1999 NPRM, including comments which were received late but which were included in the rulemaking record and fully considered. The commenters included individuals, a union, employee associations, lawyers or law firms, businesses, trade and business associations, educational and research facilities and associations, U.S. Government agencies, and Members of Congress (one comment from two Senators and one comment signed by 23 Members of Congress (hereafter referred to as ``Congressional commenters'')). The proposals eliciting the greatest numbers of comments were those regarding non-productive time (or ``benching''), the information required on the LCA regarding the employer's status as H-1B-dependent, recruitment, displacement, and the posting of notices. Individual commenters were critical of the H-1B program generally, describing it as particularly detrimental to the job security of older Americans, and sought more guidance from the Department with regard to procedures which American workers may follow to prove displacement. These commenters also urged the Department to strictly enforce the ACWIA ``no benching'' provisions; include a requirement that all employers check the H-1B dependency box on Form ETA 9035, with the imposition of heavy fines for noncompliance; and require the physical posting of all notices at the place of employment or worksite. The union and employee association commenters generally endorsed the Department's proposed regulations. Educational and research facilities primarily addressed and supported the Department's proposals regarding determination of prevailing wages for employees of those institutions. These commenters also urged the Department and the INS to be consistent in their application of the definitions contained in the regulatory provisions. Two associations, one representing the interests of immigration lawyers and the other representing the interests of firms which provide international personnel to American businesses, commented on virtually every proposal made by the Department in the NPRM. Lawyers and law firms particularly addressed the proposal that all fees and costs connected with the filing of the LCA and H-1B petition, including attorney and INS fees, are to be borne by the employer. The Department's proposal addressing the timing of the H-1B dependency determination also drew a strong response from commenters representing business interests. Senator Abraham, one of the ACWIA's Congressional sponsors, submitted his October 21, 1998 Congressional Record remarks to be included in the rulemaking record. Senator Abraham, along with Senator Bob Graham, further commented on a number of NPRM provisions they believed to be inconsistent with Congressional intent. The Department also received a letter signed by 23 Congressmen and Senators, including Senators Abraham and Graham. These commenters expressed concerns on a number of provisions, including proposed paperwork requirements, the requirement that the actual wage be based on an objective system, and the 90-day short-term placement option. III. General Issues Applicable to the Rule In the review of the comments and the development of this rule, the Department realized that there are a number of general issues which affect the entire rule. The following discussion addresses these issues. A. The Administrative Procedure Act On January 5, 1999, the Department of Labor published a Notice of Proposed Rulemaking (NPRM) in the Federal Register (64 FR 628). The Department published the NPRM to obtain public comment and assistance in the development of regulations to implement changes made to the INA by the ACWIA, and to provide an additional opportunity for comment on certain provisions which were previously published for comment as a Proposed Rule in 1995 (60 FR 55339). In addition, the Department sought comments on various interpretations of the existing regulations, published as proposed Appendix B. The Department's NPRM set forth specific regulatory language for comment on some, but not all, of the issues arising from the provisions of the ACWIA. For those issues with no specific regulatory language, the Department identified concerns, and set out its proposed approach to addressing [[Page 80120]] them or described alternative approaches. The Department sought comment on all of these issues and proposals. The Department was mindful of Congress' intent that the ACWIA implementing regulations be promulgated in a ``timely manner;'' the legislation allowed a public comment period of ``not less than 30 days.'' Accordingly, the Department set a 30-day comment period, to close on February 4, 1999. Upon petition by the American Council on International Personnel (ACIP), the Department extended the comment period another 15 days, until February 19, 1999. After consideration of the comments received, the Department now issues this Interim Final Rule and invites further comment on the regulatory provisions set forth in Part IV.A through N of this preamble and the accompanying regulatory text. After reviewing any comments received, the Department will issue a Final Rule. The Department received 13 comments on its regulatory process. The comments focused primarily on the length of the comment period and the NPRM's lack of regulatory text on various issues. Nine commenters generally objected to the length of the comment period in combination with the lack of regulatory text, variously contending that the requirements of the Administrative Procedure Act (APA) were violated in that the bulk of the proposals together with the lack of regulatory text, definitions, and clear explanations prohibited meaningful comment even within the extended period allowed. The American Immigration Lawyers Association (AILA) recommended that the Department withdraw the NPRM and issue an Advance Notice of Proposed Rulemaking (ANPR). ACIP and Senators Abraham and Graham suggested that the Department publish a proposed rule with request for comment prior to implementing an interim final or final rule. ACIP also expressed concern about the inclusion of the outstanding issues in the 1995 NPRM in the proposed rule. In the alternative, ACIP and the American Council on Education (ACE) requested the Department to defer enforcement of the interim final rule during an employer education period of at least 60 days following its promulgation. The Department has concluded that the delay inherent in the publication of an ANPRM or a new NPRM with full regulatory text would not be warranted. The new attestation requirements for H-1B-dependent employers and willful violators created by the ACWIA do not take effect until these regulations are promulgated and will terminate on October 1, 2003 (with the extended ``sunset'' date specified by the October 2000 Amendments). Congress specifically allowed a comment period of 30 days. The Department obliged commenters by extending this period an additional 15 days. The analysis of the comments and the preparation of this Interim Final Rule have been a complex and time-consuming process. The Department is of the view that there should be no further delay of key ACWIA provisions. The Department is now providing an additional opportunity for comment on the provisions of the Interim Final Rule. Also, the Department seeks comments on additional proposals presented for the first time; these proposals are not included in the Interim Final Rule but are presented for comment for possible inclusion in the Final Rule. The Department is of the view that the procedure followed on this Rule is in full compliance with the notice and comment provisions of the APA. The APA requires that an agency include in its notice of proposed rulemaking ``either the terms or substance of the proposed rule or a description of the subjects and issues involved.'' 5 U.S.C. 553(b)(3); see Kooritzky v. Reich, 17 F.3d 1509, 1513 (D.C. Cir. 1994). Furthermore, the agency must give ``interested persons an opportunity to participate in the rulemaking through submission of written data, views, or arguments.'' 5 U.S.C. 553(c). Thus, under the plain language of the APA, the absence of complete regulatory text in the NPRM does not compromise the Department's compliance with the notice and comment requirements of the APA. The lengthy and detailed preamble to the NPRM, setting forth the Department's proposals and concerns on each of the issues, struck a balance between the need to promulgate regulations expeditiously (created by the ACWIA provision that its new attestation requirements would not take effect until regulations are issued and will terminate on October 1, 2001 (now extended until October 1, 2003), as well as the need to give regulatory guidance with regard to those ACWIA provisions which took effect immediately), and the opportunity to provide meaningful public comments. Certainly the public has a right to have a sufficient description of the subjects and issues involved to offer meaningful comment. The Department believes that it has fully accommodated this need with its detailed discussion in the NPRM preamble. Furthermore, in addition to describing the provisions it proposed to promulgate where regulatory text was not included in the NPRM, the Department discussed and sought comments on numerous additional alternatives it was considering, in an attempt to ensure that there would be no surprises to the public if, after a review of the comments, it determined that an alternative was appropriate for the Interim Final Rule. The NPRM preamble is sufficiently detailed to ``inform the reader, who is not an expert in the subject area, of the basis and purpose for the * * * proposal[s].'' Federal Register Act, 44 U.S.C. 1501-1511 and regulations thereunder, 1 CFR 1812(a). The Department has carefully considered the request for a delay in enforcement for 60 days after the effective date of the regulations. The Department notes that the new law was extensively negotiated with stakeholders for nearly a year before it was enacted, that stakeholders have been aware of the Department's proposed approach to the issues for more than a year, that a number of the provisions will be in effect for only a limited period of time, and that several provisions that are the subject of this rulemaking relate to applications of the law that have been in effect for nearly a decade and have been addressed in prior rulemaking. Furthermore, the Department plans to undertake extensive education efforts, as discussed below. The Department has therefore concluded that it is inappropriate to administratively declare a period in which civil money penalties and debarment would not be imposed. However, we would point out that in all cases the Department's enforcement and the penalties imposed take into consideration the full circumstances of any violations found, within the constraints of the statutory requirements. See INA, section 212(n)(2)(C), 8 U.S.C. 1182(n)(2)(C), and Sec. 655.810 of this Rule. Furthermore, with regard to the recordkeeping requirements in particular, as discussed in IV.M.5 below, the Department will issue CMP assessments for violations only where it finds that the violation impedes the ability of the Administrator to determine whether a violation of the H-1B requirements has occurred, or the ability of members of the public to have information needed to file a complaint or information regarding alleged violations of the Act. Finally, the Department notes that the changes to the method of making prevailing wage determinations for academic institutions and related nonprofit entities, nonprofit research organizations, and Governmental research organizations, set forth at [[Page 80121]] Sec. 655.731(a)(2) and 656.40, are effective immediately and apply retroactively to all LCAs filed on or after October 21, 1998, as well as to all LCAs filed earlier to the extent that the prevailing wage determination was subject to an administrative or judicial determination that was not final as of October 21, 1998. Pursuant to 5 U.S.C. 553(d), the Department finds good cause to make these provisions effective immediately in light of the statutory provisions at Section 415(b) of the ACWIA, expressly making the changes in the prevailing wage determinations apply retroactively. B. Dissemination of Information to the Public A significant concern expressed by a large number of commenters is the need to ensure that both U.S. and H-1B workers, as well as employers, are well-informed about their rights and obligations under the H-1B program in general, and the new provisions of the ACWIA in particular. The Department appreciates the importance of such education and intends to undertake active efforts to educate the public about the H-1B program. Specifically, the Department intends to prepare and make available pamphlets, fact sheets and a small business compliance guide in both written and electronic formats. These resources will explain the obligations of employers, the rights of H-1B and U.S. workers, and the roles of the Department of Labor and the other government agencies involved in the program (the INS, the Departments of Justice and State). The resources will also reference materials available from these agencies that bear on the employment of H-1B nonimmigrants. The Department also plans to work with the INS and the State Department to develop a pamphlet to be provided to visa applicants and posted electronically that will explain rights and responsibilities under the H-1B program. The electronic compliance material will be available through the Department's web page at http://www.dol.gov, which will provide electronic links to other sources of information that bear on the employment of nonimmigrants. From the home page, the material will be accessible either by going to DOL Agencies: Employment Standards Administration, Wage and Hour Division (WHD), then to Laws and Regulations, and then to Compliance Assistance Information: Wage and Hour Division, or by going directly to http://www2.dol.gov/dol/esa/public/regs/compliance/whd/whdcomp.htm. The Department also intends to add an ``H-1B Advisor'' to its Internet ``Employment Laws Assistance for Workers and Small Businesses'' (ELAWS) system (located at the bottom of the home page). The H-1B ELAWS Advisor will be an interactive program that helps employers, employees, and other interested parties determine their H-1B rights and responsibilities, 24 hours-a-day, 7 days-a-week. The Advisor imitates the interaction an individual may have with a DOL expert--it asks questions, provides information, and directs the user to the appropriate resolution based on the responses given. This information may also be obtained from the Wage and Hour Division's national and local offices. Mail requests should be addressed to the Wage and Hour Division Immigration Team, Room S-3510, 200 Constitution Avenue, NW., Washington, DC 20210. Telephone requests should be made of the Wage and Hour Division Immigration Team at (202) 693-0071. The addresses and phone numbers for Wage-Hour's district offices may be found on the Department's website at http://www.dol.gov/dol/esa/ public/contacts/whd/america2.htm, and in the Federal government section of local telephone directories. Additionally, the Interim Final Rule refers to three electronic resources: America's Job Bank, O*NET, and the Occupational Outlook Handbook . The job bank may be accessed at http://www.ajb.dni.us. The O*NET may be downloaded for free or ordered through the Government Printing Office, which can be reached through the Department's weblink at http://www.doleta.gov/programs/onet. The Occupational Outlook Handbook, published by the Department/s Bureau of Labor Statistics, may be found at http://stats.bls.gov/ocohome.htm. Finally, the Department will continue its practice of making available speakers for groups affected by the Department's administration of the H-1B program. The Department will also furnish information and copies of its resource materials to both employee and industry organizations to facilitate distribution to their member organizations. IV. Discussion of Provisions of Interim Final Rule and Comments Issues arising under the Proposed Rule, including the Department's response to comments thereon are discussed below. For the convenience of the public, the numbering in this part of the Preamble remains the same as in the Proposed Rule unless otherwise indicated. The Department notes that, in a few instances, it is requesting comments in the Interim Final Rule on a regulation or an approach to a regulation on which it has not previously sought comment. These provisions are not included in the Interim Final Rule, but rather will be considered when the Department promulgates the Final Rule after review of any comments. These issues are highlighted in the preamble. The Department also notes that the new regulatory text published here generally includes all of the surrounding regulatory text in order to provide context to the reader. However, the only provisions which are open for comment are the issues discussed in the Preamble. Further, the Department notes that the Interim Final Rule includes changes in the regulations to implement the October 2000 Amendments. These matters are discussed in the appropriate sections of the Preamble, and comments on the provisions are invited. The Department has been working with the INS to coordinate our respective rulemaking efforts under the Act and to achieve consistency in the implementation of the ACWIA provisions and the October 2000 Amendments. A. What Constitutes an ``Employer'' for Purposes of the ACWIA Provisions? (Sec. 655.736(b) and Sec. 655.730(e)) Section 212(n)(3)(C)(ii) of the INA as amended by the ACWIA directs that ``any group treated as a single employer under subsection (b), (c), (m), or (o) of section 414 of the Internal Revenue Code of 1986 shall be treated as a single employer'' for purposes of defining an ``H-1B--dependent employer.'' These provisions, found at 26 U.S.C. 414(b), (c), (m) and (o), concern the circumstances in which ostensibly separate businesses are treated by the Internal Revenue Code (IRC) as a single employer for purposes of pension and other deferred compensation plans. Section 414(b), (c), and (m) of the IRC, respectively, define ``controlled group of corporations,'' ``partnerships, proprietorships, etc., which are under common control,'' and ``affiliated service group.'' Section 414(o) 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 Section 414(o) will not be taken into account in determining who is treated as a single [[Page 80122]] employer for ACWIA purposes unless regulations are issued by the Department of the Treasury during the period the H-1B-dependency provisions of the ACWIA are effective. Section 414(b) of the IRC provides that all employees within a ``controlled group of corporations'' (within the meaning of section 1563(a) of the Code, determined without regard to sections 1563(a)(4) and (e)(3)(C)) are treated as employed by a single employer. Under section 1563(a) and the related Treasury regulations, 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). A parent-subsidiary is, generally, 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. In general terms, 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. 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. Section 414(c) of the IRC and the related Treasury regulations state that all employees of trades or businesses (whether or not incorporated) that are under common control are treated as employed by a single employer. 26 U.S.C. 414(c); 26 CFR 1.414(c)-2. Trades or businesses include sole proprietorships, partnerships, estates, trusts and corporations. Trades or businesses are under common control if they are included in a parent-subsidiary group of trades or businesses, a brother-sister group of trades or businesses, or a combined group of trades or businesses. Generally, the standards for determining whether trades or businesses are under common control are similar to the standards that apply to controlled groups of corporations. However, for these purposes, 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. Section 414(m) of the IRC provides that all employees of the members of an ``affiliated service group'' are treated as employed by a single employer. 26 U.S.C. 414(m). In general terms, an affiliated service group is 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 (i) a significant portion of the second organization's business is the performance of services for the first organization (or an organization described in clause (a) of this sentence or for both) of a type historically performed in such service field by employees, and (ii) 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 clause (a) of this sentence). IRS has issued proposed regulations at 52 FR 32502 (Aug. 27, 1987), which may be consulted to ascertain IRS's interpretation of these provisions. In the event of an H-1B investigation involving the issue of what entity or entities constitute a single employer for purposes of the ACWIA dependency provisions, an employer will be required to provide documentation necessary to enable the Department to apply these IRC provisions. The Department emphasizes that if an employer wishes to use the definitions in section 414(b), (c) or (m) of the IRC, it will be the employer's burden to establish that it meets the requirements of the IRC and the regulations thereunder. In the NPRM, the Department stated that it was considering the effect and implications of adopting this single definition of ``employer,'' as set forth in these IRC sections for all purposes under this program, to the extent it may serve to accommodate business activities and facilitate administration and enforcement of the H-1B program. Specifically, the Department sought comment on the consequences of a regulation which would provide that where an ``employer'' files an LCA and thereafter undergoes some change of structure (e.g., buy-out by a successor corporation; corporate restructuring or ``spin-off'' of subsidiaries), the employer for LCA purposes would be the entity which satisfies the IRC definition of a single employer. The Department sought comment on whether and how it may be able to modify its current position that a new LCA must be filed when the employer's corporate identity changes and a new Employer Identification Number (EIN) is obtained. Thus, the Department raised the possibility an employer which changes its corporate identity through acquisition or spin-off would be allowed to forego the filing of new LCAs if it documented this change in its public access file, provided that it satisfies the IRC definition of a single employer and that the documentation includes an express acknowledgment of all LCA obligations on the part of the ``new'' entity. The Department also sought comments on whether another approach should be used to address corporate restructuring. The Department received 17 comments on its proposals with regard to defining an employer for purposes of the H-1B program. ACIP, AILA and the Information Technology Association of America (ITAA) strongly opposed using the relatively broad IRC definition of ``single employer'' for any purpose other than determining whether an employer is H-1B-dependent as provided in the ACWIA. These organizations generally asserted that there was no basis to infer that Congress intended to expand this extraordinarily broad definition to the entire H-1B law and that expanded use of this definition would not facilitate corporate concerns in administering an employer's obligations in the H-1B program. AILA further asserted that the IRC ``single employer'' concept is designed to prevent the avoidance of employee benefit requirements through the use of separate organizations, employee leasing, or other arrangements. Therefore, AILA observed, to prevent discrimination in employee benefits in favor of highly compensated employees, the ``single employer'' encompasses all entities that are related by financial interest (ownership or transactional). In contrast, AILA averred, the H-1B program seeks to protect U.S. workers and, to promote this purpose, an ``employer,'' at a minimum, should have an employment relationship with respect to covered workers, as defined by the ability to hire, fire, pay and other indications of control. Thus, AILA concludes, to depart from the longstanding definition of ``employer'' in the H-1B program, without explicit statutory authority, would be improper. Nine commenters (AILA, Cowan & Miller, ITAA, Rubin & Dornbaum, the [[Page 80123]] Small Business Survival Committee (SBSC), the U.S. Chamber of Commerce, White Consolidated Industries, Network Appliance, and the Fred Hutchinson Cancer Research Center (FHCRC)) stated their view that extending the use of the definition of ``single employer'' would serve no useful purpose in facilitating corporate restructuring and efficient H-1B administration. In fact, they asserted, broader application would have the opposite effect by requiring multi-entity corporations to coordinate many functions among the various entities, including benefits, wages, movement of H-1B employees among the entities, lay- offs, and other purposes, every time an H-1B worker is hired, promoted, or moved. The Chamber of Commerce, however, suggested that if a single employer analysis is required outside the H-1B-dependent employer context, the Department should adopt the four-factor test developed by the National Labor Relations Board and approved by the Supreme Court in single employer labor law cases, rather than the analyses required by IRC Section 414. ITAA sought clarification on the calculation of H-1B dependency given the ACWIA's definition of ``employer.'' For instance, ITAA noted, a controlled group could consist of parent A and subsidiaries B, C and D. If subsidiary B were to file an LCA, would the H-1B dependency calculation be made using all employees of A, B, C, and D, or only the employees of B? The Department believes that, under the IRC definition of ``controlled group,'' all of the employees of A, B, C, and D would be included in the dependency calculation if any of the subsidiaries or the parent company filed the LCA. Many employers and their representatives supported the Department's proposal to modify its current requirement for filing of a new LCA upon a change in the EIN. AILA, ACIP, Intel Corporation (Intel), ITAA and the Society for Human Resource Management (SHRM) urged a rule that a new or amended LCA and H-1B petition not be required upon an acquisition, merger, spin-off, transfer or other corporate reorganization regardless of whether there is a change in the EIN. ACIP further urged that no new or amended LCA and H-1B petition be required whether or not the new entity meets the IRC definition of ``single employer.'' Essentially, these groups endorsed a position that they stated is similar to the I-9 provisions of the INA, 8 CFR 274a.2(b)(1)(viii)(A)(6) & (7), whereby the new employer has the option of assuming the immigration-related liabilities of the old employer regardless of whether the employer assumes any other liabilities in the transaction. Similarly, AILA suggested application of established successor-in-interest rules. Two other commenters (Kirkpatrick & Lockhart, Jose E. Latour and Associates (Latour)) also urged consistency between INS and DOL rules. ACIP elaborated on this issue, suggesting that continued corporate compliance responsibility in the event of restructuring could be accomplished via a simple memorandum placed in the public access file, rather than a new LCA, except where there is a material change in the worker's job duties or the worker is relocated to a site not covered by an LCA, or the new entity hires a new H-1B worker. ACIP stated that an employer should not be able to use positions on the previous entity's LCA to hire a new H-1B nonimmigrant. The AFL-CIO opposed the Department's proposed modification to the current LCA filing requirements because, in its view, it could create the substantial risk that employers, through acquisition or spin-off, could in fact create an H-1B-dependent workforce and yet avoid the concomitant recruitment and non-displacement obligations of H-1B- dependent employers. The AFL-CIO pointed out that the governing IRS regulations use the ``common control'' test to determine whether a parent-subsidiary group of corporations or brother-sister trades or business satisfy the Code's definition of single employer. The AFL-CIO suggested that under the Department's proposal, a non-H-1B-dependent corporation that has filed an LCA, but has yet to hire any H-1B workers under that application, could create an H-1B-dependent subsidiary corporation that meets the ``common control'' test, but avoid filing a new LCA. The parent could then acquire the requested or remaining number of H-1B workers on its outstanding LCA, and place them in the subsidiary workforce without applying any of the new attestation requirements for H-1B-dependent employers. The Department believes that the AFL-CIO's legitimate concerns are related to the statutory definition of ``dependent employer'' and not to the proposal to eliminate the requirement to file a new LCA when an employer, as defined by the ACWIA, undergoes a change in corporate structure. Thus, given the scenario presented by the AFL-CIO, under the ACWIA-imposed definition of ``employer'' the parent corporation and its subsidiaries (if they meet the ``common control test'') are a ``single employer'' whose entire, combined work force is assessed to determine dependency. Under the IRC definition, the H-1B employees of the ``subsidiary'' are considered part of the larger work force of the ``parent'' corporation, which then may or may not be a dependent employer required to comply with the ACWIA attestation requirements. Based on a careful review of all the comments submitted on this issue, the Department agrees that the use of the IRC definition of ``employer'' should be limited to determining H-1B-dependent employer status, as set forth in section 212(n)(3)(C)(ii). The IRC rules do not appear useful to facilitate the resolution of issues involving changes in corporate status. However, as urged by the commenters, the Department has concluded that it is appropriate to change its current requirement that a new LCA (and, as a result, a new H-1B petition) be filed when corporate identity changes result in a change in the employer's EIN number. In the past, the Department has taken the position that a new LCA must be filed to assure continued compliance responsibility by the ``new'' employer--a corporate entity other than the one that filed the LCA in the first place. The Department understands, however, that when a corporate identity changes, it is common for the H-1B worker(s) to continue to perform the same job duties in the same location for the new, restructured entity, and for the new entity to assume the obligations of the previous entity. In such circumstances, where the obligations are assumed and there is no real change in the H-1B worker's job and his/her ``new'' employer's responsibilities, filing a new LCA and H-1B petition solely because of the change in corporate structure would be an unnecessary and burdensome exercise for the employer, the State Employment Service Agency (SESA) responsible for a prevailing wage determination, the Department in reviewing the LCA, and the INS in adjudicating the H-1B petition. Further support for the Department's position is found in the October 2000 Amendments, in which Congress specified: An amended H-1B petition shall not be required where the petitioning employer is involved in a corporate restructuring, including but not limited to a merger, acquisition, or consolidation, where a new corporate entity succeeds to the interests and obligations of the original petitioning employer and where the terms and conditions of employment remain the same but for the identity of the petitioner. Section 314(c)(10) of the INA, 8 U.S.C. 1184(c)(10), as enacted by section 401 of [[Page 80124]] the Visa Waiver Permanent Program Act. While this new INA provision is directed to the INA's processing and adjudication of petitions, we consider it to be instructive as to Congress' intent that a restructured ``new'' corporate employer be authorized to continue the employment of existing H-1B nonimmigrants on the same terms and conditions as the ``original'' employer. Therefore, the Department's Interim Final Rule, at Sec. 655.730(e), provides that a new LCA will not be required merely because a corporate reorganization results in a change in corporate identity, regardless of whether there is a change in the EIN, provided that the new employing entity, prior to the continued employment of the H-1B nonimmigrant, agrees to assume the predecessor entity's obligations and liabilities under the LCA. The agreement to comply with the LCA for the future and assumption of liability for any past violations must be documented with a memorandum in the public access file, specifically identifying the affected LCAs and the EIN of the new employing entity, and describing the new employing entity's actual wage system (see IV.O.3, below). In addition, the employer will be required to retain in its records a list of the name and job title of each H-1B worker transferred to the new employer. It should be noted that the employer's status as a new employing entity which is not required to file a new LCA is not determined by traditional principles of successorship (although we anticipate that the new entity will commonly be a successor employer), but rather by the new entity's agreement to undertake the obligations and liabilities of the predecessor under the LCA. This position is consistent with the assumption of liability under the INA, 8 CFR 274a.2(b)(1)(viii)(A)(6) and (7), whereby a new employer may either assume liability for the old I-9 forms or prepare new ones, and provides the employer with flexibility to deal with the circumstances surrounding the particular corporate reorganization. These principles apply whether the reorganization is as a result of an acquisition, merger, sale of stock or assets (``spin-off''), or similar change in corporate structure. The Department cautions that an employer which undergoes a change in structure and EIN, but chooses not to insert the required memorandum in the public access file, is required to file new LCAs. A new LCA (and H-1B petition) will be required if the H-1B worker changes jobs or where the new entity/employer seeks to hire a new H-1B worker or to extend an existing H-1B petition. Thus the ``new'' employer may not utilize H-1B ``slots'' left over from the previous entity's LCA for a worker hired after a reorganization or restructuring. The Department also understands that where there is a material change in duties (whether or not there is a change in occupation), INS may require the filing of a new H-1B petition. The Department emphasizes that a change in a corporation's H-1B- dependency status as a result of a change in the corporate structure would have no effect on the employer's obligations with respect to its current H-1B workers. In other words, a corporation which was H-1B- dependent, and as a result of a change in structure becomes non- dependent, would be required to continue to comply with the secondary displacement attestation unless it chooses to file a new LCA and H-1B petition(s) for any H-1B worker(s) employed pursuant to the ``dependent'' LCA. Similarly, a non-dependent corporation which becomes dependent as a result of corporate restructuring would not be required to comply with the H-1B-dependent employer obligations for H-1B workers employed pursuant to a pre-existing LCA, provided the employer has assumed the obligations and liabilities of that LCA. Furthermore, as discussed, a new LCA (attesting to the newly acquired H-1B-dependent or non-dependent status) would have to be filed for all future H-1B petitions and extensions of status. B. What Is an H-1B Dependent Employer or a Willful Violator? (Sec. 655.736(a) and (f)) The ACWIA requires non-displacement and recruitment attestations by ``H-1B dependent employers'' and by employers found, after the date of ACWIA's enactment, to have committed a willful violation or a misrepresentation of a material fact on an LCA during the five-year period preceding the filing of an LCA. The ACWIA definition of ``H-1B-dependent employer'' provides a formula for comparing the number of H-1B nonimmigrants employed to the total number of full-time equivalent employees (FTEs) in the employer's workforce. The Act provides that an H-1B-dependent employer is one that employs in the United States: 25 or fewer FTEs, and more than seven H-1B nonimmigrants; or At least 26 but not more than 50 FTEs, and more than 12 H- 1B nonimmigrants; or, At least 51 FTEs, and H-1B nonimmigrants in a number that is equal to at least 15 percent of the number of such FTEs. Thus, the H-1B-dependency formula for all employers uses two dissimilar numbers: the number of H-1B nonimmigrants employed (a ``head count'' of all H-1B workers, both full-time and part-time) and the number of FTEs (including both H-1B workers and other employees). For larger employers (i.e., those with 51 or more FTEs), the computation is made with the number of H-1B workers as the numerator and the number of FTEs as the denominator; if the ratio is greater than 15 percent, then the employer is H-1B-dependent. The structure and application of this statutory definition was addressed by one commenter (Tata Consultancy Services (TCS)), which urged the Department to focus on the perceived purpose rather than the language of the statutory test. TCS described itself as the largest and oldest software consulting and development firm in Asia, employing some 12,000 workers hired and trained in India, and conducting business in the U.S. through contracts to provide services both at client locations and at TCS locations. TCS expressed concern that ``the Act and the Department's proposals literally include TCS as an H-1B dependent employer, since the number of TCS employees on H-1B visas is more than 15 percent of TCS' employees in the United States.'' While acknowledging that it is an H-1B-dependent employer under the literal language of the statute (and thus subject to the additional attestation obligations for such employers), TCS urged the Department to issue a regulation which focused not on the express statutory provision but rather on the intention of Congress to impose the new obligations on ``job shops.'' In TCS's view, its own operation should not be included in the definition of H-1B-dependent employer because its operation does not constitute a ``job shop,'' which it defines as companies which ``seek only to make money from the temporary placement of foreign personnel with respect to whom the job shoppers have no real employer/ employee relationship.'' The Department has considered the TCS suggestion but has concluded that the regulation must reflect the express language of the ACWIA definition. There being no ambiguity in this provision, the Department has no authority to promulgate a regulation defining a ``job shop'' and substituting that definition for the mathematical computation prescribed in the statutory definition of ``H-1B-dependent employer.'' The ACWIA specifies that ``exempt H-1B nonimmigrants'' are not to be included in the employer's determination of its H-1B dependency [[Page 80125]] status during a certain period after enactment of the Act (i.e., six months from the date of enactment (thus, until April 21, 1999), or until the date of the Department's final rule on this provision is issued (thus, the date of this Interim Final Rule)). None of the comments on the H-1B-dependent employer issues addressed the limited exclusion of ``exempt'' H-1B workers from the determination of H-1B-dependency. The prescribed period for this limited exclusion expires with the issuance of this Rule, and all ``exempt'' H-1B workers are henceforth to be included in the employer's determination of H-1B-dependency status. Therefore, the Department has determined that it is not necessary or appropriate to include in this section of the regulation any language concerning this now moot limited exclusion for ``exempt'' H-1B workers. As stated above, the new non-displacement provisions and recruitment requirements contained in the ACWIA also apply to employers found, after the date of ACWIA's enactment, to have committed a willful violation or misrepresentation during the five-year period preceding the filing of an LCA. Section 655.736(f) of the Rule provides that an employer who is a ``willful violator'' is one who is found in either a Department of Labor proceeding pursuant to these regulations, or a Department of Justice proceeding pursuant to section 212(n)(5) of the INA as amended by the ACWIA, 8 U.S.C. 1182(n)(5), to have committed either a willful failure to comply with the requirements of Section 212(n) or a misrepresentation of material fact during the five-year period preceding the filing of the LCA in question. Furthermore, the final decision in the proceeding finding willful violation or a misrepresentation must have been entered on or after the date of enactment of the ACWIA. ``Willful failure'' is defined in accordance with the existing regulations at Sec. 655.805(b). The following discussion addresses the other matters raised in the NPRM and in the comments, including the meaning of ``FTE,'' the manner and time of determining H-1B-dependency status, documentation of the determination, and the designation(s) to be made on the LCA regarding an employer's status as an H-1B-dependent employer or a willful violator. 1. What Is a ``Full-Time Equivalent Employee''? (Sec. 655.736(a)(2)) The ACWIA definition of ``H-1B-dependent employer'' includes the term ``full-time equivalent employees'' (FTEs) as a critical part of the calculation to determine an employer's H-1B-dependency status. The term is not defined in the Act. The NPRM explained that the Department considered various interpretations of the term ``full-time equivalent,'' some of which would significantly increase an employer's paperwork burden. The NPRM recognized that an employer's FTEs would include only its employees (both H-1B nonimmigrants and U.S. workers) and would not include bona fide consultants and independent contractors who do not meet the employment relationship test under the common law. The NPRM also recognized that the determination of the number of FTEs would need to include consideration of both the employer's full-time employees and its part-time employees (if any). The Department pointed out that one possible approach to the FTE determination--presumably the most burdensome approach, from the employer's perspective--would be to maintain records of all hours of work by all employees (both hourly-paid and salaried workers, both full-time and part-time workers) during a certain period of time (e.g., a year, a work week), and to divide that total by a number of hours constituting a full-time employee standard. The Department proposed a less onerous approach, in which FTEs could be determined in a two-step process. First, the number of employees would be determined through the employer's quarterly tax statement (or similar document) (assuming there is no issue as to whether all employees are listed on the tax statement). Second, the employer would count its full-time workers using some standard threshold; each full-time worker would constitute one FTE. The employer's standard for full-time employment would be accepted, provided it was no less than 35 hours per week (or, where the employer has no standard, 40 hours per week). Third, the employer would aggregate its part-time employees into FTEs by identifying the workers' average number of hours of work per week, then aggregating these average weekly hours, and finally dividing that total by the employer's standard for full-time employment. The aggregation of the average hours of the part-time workers into FTEs would be made through an examination of the last payroll (or the payrolls over the previous quarter if the last payroll is not representative) or through other evidence as to average hours worked by part-time employees (such as evidence of their standard work schedule). Thirteen commenters responded to the Department's proposal and offered alternatives for determining FTEs. Four commenters addressed issues concerning the identification of ``employees.'' Three commenters (ACIP, AILA, SHRM) expressed concern at what they viewed as the NPRM's inappropriate inclusion of consultant and contractor personnel in the determination of FTEs based on ``indicia of an employment relationship'' with the employer. The commenters asserted that this approach was inconsistent with the statute, that the determination of FTEs should include only those persons whom the employer considered to be its employees, and that the application of an ``indicia'' test to all personnel including consultants and contractors would be burdensome. ACIP stated that the application of the test would be inconsistent with the NPRM proposal that FTEs be calculated by examining the employer's quarterly tax statements to determine the number of employees on the payroll; ACIP noted that consultants and contractors would not appear on these tax statements. The commenters suggested that the identification of ``employees'' for purposes of the determination of FTEs should be a simple head count of workers on the employer's payroll (i.e., persons identified by the employer on these records as its employees). On the related matter of the proposed sources of information as to the number of employees--the employer's payrolls and tax statements-- the AFL-CIO recommended that the FTE determination use an average of the number of employees shown on the employer's last three quarterly tax returns, and not the last quarterly return and the last payroll period, because this averaging process would prevent employers from timing the filing of LCAs to coincide with a greater ratio of FTEs to H-1B workers so as to avoid H-1B-dependency status. It appears to the Department that some commenters' assertions regarding ``indicia of employment'' are based on a misapprehension of one aspect of the proposal. The NPRM did not propose that an ``indicia of employment'' test would be applied in this context; the ``indicia'' test was created in the ACWIA for purposes of the secondary displacement prohibition. The NPRM stated that the common law test of ``employment relationship'' would be used in identifying the persons to be included as ``employees'' in the FTE computation, and that bona fide consultants and independent contractors would be excluded from the count. The Department is of the view [[Page 80126]] that it is not necessary for the employer to do a detailed analysis of application of the common law test to every worker in order to identify ``employees'' for purposes of FTE determinations. Instead, as indicated in the NPRM and supported by the commenters, the employer's existing identifications of workers as ``employees'' (as opposed to consultants or contractor personnel) will ordinarily be sufficient for this purpose and no additional analysis will be needed. Thus, the Interim Final Rule, at Sec. 655.736(a)(2)(i), provides that the determination of FTEs is to include those persons who are consistently treated by the employer as ``employees'' for all purposes, including payroll records and Internal Revenue Service statements. The determination of FTEs is not to include those persons who are consistently treated by the employer as consultants or independent contractors for all such purposes, and for whom the employer fills out IRS Form 1099, provided there is no issue as to whether this treatment is bona fide. For any persons who are not consistently treated as either employees or consultants/contractors, the facts and circumstances must be examined in accordance with the common law test for an employment relationship with the employer. The common law test is the required standard for this analysis, since the Act does not prescribe a standard and, as a matter of law, the common law test applies. See, Nationwide Mutual Insurance Co. v. Darden, 503 U.S. 318 (1992); Community for Creative Non-Violence v. Reid, 490 U.S. 730 (1989). The Department notes that all H-1B workers are necessarily employees within the meaning of the INA, and therefore must be included in both the numerator and the denominator of the dependency determination. Similarly, the Department is of the view that it is not necessary for an employer to compute an average number of ``employees'' based on a series of quarterly tax statements. The Department agrees with the AFL-CIO that it would be desirable to foreclose the possibility of potential abuse of the program by employers who have significant fluctuations in the numbers of ``employees'' and who might time their LCA submissions based on tax statements with ``employee'' numbers supporting non-H-1B-dependency status. However, the Department has concluded that the imposition of an averaging/computation burden on all employers would be an inappropriate means of foreclosing the possibility of an unknown--but presumably very small--number of abusive filings. The Department cautions that, where it appears that an employer has manipulated its employment numbers to avoid dependency just prior to filing LCAs or H-1B petitions, the Department will examine the situation closely and utilize an employer's normal payroll. Further, with regard to the use of quarterly tax statements, the Interim Final Rule also clarifies that after determining which workers are ``employees,'' it will be necessary in determining FTEs to separate those employees who are part-time, do a separate FTE determination for those workers, and then add those FTEs to the number of full-time workers to determine total FTEs. One commenter (ITAA) objected to the Department's proposal to count all H-1B nonimmigrants (both full-time and part-time) in the numerator of the equation to calculate H-1B-dependency. ITAA suggested that, for fairness and mathematical accuracy, the regulation should be written so that part-time H-1B workers are counted in the numerator in the same manner as part-time employees are counted in the denominator. Similarly, AILA argued that whether the regulation uses a simple head count or a calculation of FTE taking into consideration part-time hours, there should be consistency in counting workers for both the numerator and the denominator. The Department has considered these suggestions, but has concluded that they cannot be accepted because the statutory language requires the difference in counting as described in the NPRM. The ACWIA prescribes the computation of ``full-time equivalent employees'' for the entire workforce, and explicitly requires that the number of FTEs be compared to the number of ``H-1B-nonimmigrants'' (with no distinctions as to full-time or part-time status). Nine commenters addressed the matter of determining what constitutes a full-time worker for purposes of computing the employer's FTEs. Three commenters (AILA, Hammond & Associates (Hammond), and Latour) recommended that ``full-time'' be determined by individual employers consistent with their standards and business practices. Five commenters (ACIP, Intel Corporation (Intel), Kirkpatrick & Lockhart (Kirkpatrick), Rapidigm Immigration Services (Rapidigm), and American Occupational Therapy Association (AOTA)) supported the NPRM proposal that the employer should use its payroll and tax records to count the number of workers it employs on a full-time basis, using some standard. However, these comments differed with regard to the appropriate benchmark for full-time hours (e.g., 35 hours per week, 32 hours or more per week, 21 hours or more per week). Two commenters (AILA and Hammond) asserted that employers may be able to document that full-time work is a figure less than the 35 hours per week suggested in the NPRM. Two commenters (AOTA and American Physical Therapy Association (APTA)) suggested that the Department set a numerical standard for part-time employment and that all employees with hours above that standard be considered full-time. After fully considering the comments, the Department has concluded that the NPRM proposed definition of full-time will be adopted since it provides considerable flexibility for employers while incorporating a reasonable and appropriate baseline standard. Thus, the Interim Final Rule, at Sec. 655.736(a)(2)(iii)(A), provides that the employer may use its own standard for full-time employment, which the Department will accept provided that the standard is no less than 35 hours of work per week. The Department believes that this is a reasonable approach, that it is easily understood and applied, and that 35 hours as the minimum for full-time employment is a well-established labor standard, utilized by the Bureau of Labor Statistics for survey purposes. See, e.g., the definitions of the terms utilized in U.S. Bureau of Labor Statistics, Employment and Earnings. This standard is the equivalent of seven hours of work per day, five days per week, with non-working time for lunch each day. The Rule also provides that, where the employer has no standard for full-time employment, the Department in an enforcement action will use the standard of 40 hours of work per week (the Fair Labor Standards Act standard). Four commenters (ITAA, ACIP, AILA and SHRM) expressed concerns as to the need for and the methodology of aggregating part-time workers into FTEs for purposes of determining the employer's H-1B-dependency status. ACIP and SHRM suggested that no such aggregation or ``conversion'' should be required, and stated that the method proposed by the Department was burdensome, complex and unworkable. ITAA stated that the proposal would be burdensome because many part-time workers are salaried with no records of hours of work. AILA considered the proposed method to be burdensome, and offered its own proposed formula for calculation of FTEs--each full-time worker, each FLSA-exempt worker, and each part-time worker working more [[Page 80127]] than 20 hours per week would equal one FTE; part-time workers who work fewer than 20 hours per week and are not FLSA-exempt would be aggregated through an average of hours as proposed in the NPRM. The Department recognizes that, for some employers, the aggregation of part-time workers into FTEs may be somewhat burdensome. However, in light of the clear statutory language, the Department is unable to dispense with the concept of ``full-time equivalent employees,'' which is not a mere head-count of workers in the workforce (number of employees) but instead is a calculation of the number of full-time workers needed to perform the total work done by the total workforce (number of ``equivalents'' of full-time workers). Congress explicitly prescribed the use of the FTE concept at three points in the ACWIA, and must be presumed to have used the concept with an understanding of its established meaning. The concept of ``full-time equivalent employees'' is well-known t |