Recoupment of Costs When an employee changes employment under § 105 portability provision, should the initial employer try to recoup the costs of sponsoring the employee? The likely answer to this question is no. ACWIA prohibits an employer from imposing a penalty on individuals who terminate employment before the agreed upon date.¹¹⁵ Under ACWIA, the Secretary of Labor shall determine "whether a required payment is a penalty (and not liquidated damages) pursuant to relevant State law."¹¹⁶ The penalty for violating this provision is a fine of $1,000 per violation and return of any money paid by the H-1B worker in violation of this provision.¹¹⁷ The DOL's interim final regulations distinguish between permissible liquidated damages and a penalty¹¹⁸. The DOL's position is that even though state laws vary as to what constitutes liquidated damages, the laws generally "consider that penalties are amounts which are fixed or stipulated in the contract by the parties are reasonable approximations or estimates of such damage."¹¹⁹

Furthermore, the agency provides that an employer may receive "bona fide" liquidated damages from H-1B nonimmigrants, and may receive this amount from the worker as long as the reduction or deduction from wages satisfies the requirements for "authorized deductions."¹²⁰ According to the DOL, a deduction from a worker's pay may be made when it: (1) is required by law; (2) is made pursuant to a collective bargaining agreement or is "reasonable and customary in the occupation and/or area of employment"; or (3) meets certain requirements (such as obtaining a "voluntary, written authorization by the employee").¹²¹ The DOL also provides that deductions may not be made to recoup "business expenses," including "attorney fees and other costs connected to the performance of H-1B programs."¹²²

Even if the DOL had not characterized attorneys' fees as a business expense that cannot be deducted from the worker's wage, an employer likely would not be able to recover a significant amount from the worker's pay without violating the obligation to pay an H-1B worker the greater of the actual wage or prevailing wage.¹²³ The actual wage is the rate paid to "all other individuals with similar experience and qualifications for the specific employment in question."¹²⁴ If the employee is required to pay attorneys' fees, the employer could violate this provision because the worker's compensation would fall below the actual wage. The argument would be that since U.S. workers would not incur these costs, attorneys' fees obviously would not be deducted from their pay. It likely would not be prudent for an employer to attempt to recover attorneys' fees from a departing H-1B worker's final paycheck. Apart from the DOL's current position, and the potential for violating actual wage payment requirements, many state laws restrict deductions from final paychecks. As a result, the amount the employer could recover likely would not be sufficient to justify the effort.

Angelo A. Paparelli (aap@entertheusa.com) has been practicing business-sponsored immigration law for over 20 years, and is the managing partner of Paparelli & Partners LLP in Irvine, California. He is a nationally recognized speaker, published author and leading expert on cutting-edge business-related immigration issues, including the immigration consequences of mergers, acquisitions, reorganizations and other business changes, consular visa practice, audits of employers' compliance with immigration and labor regulations, and employment-based work visas. Mr. Paparelli is certified as a Specialist in Immigration and Nationality Law by the State Bar of California, Board of Legal Specialization.

Janet J. Lee is an associate at Paparelli & Partners LLP. Ms. Lee is admitted to practice law in the State of California. Before joining the firm she served as Executive Editor of The Labor Letters, Inc. from 1997 to 2000. She can be reached at jjl@entertheusa.com.