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FAQ: IMMIGRATION ISSUES RELATED TO LAYOFFS AND CORPORATE DOWNSIZING

[Readers: This is an article that is still a work in progress and I encourage your feedback on additional subjects and questions to cover. I've recently been contacted by a number of folks facing this very difficult situation and I thought I would get this article online as quickly as possible. Feel free to email me at gsiskind@visalaw.com with your questions or comments. Greg]

The recent startling economic news has many experts predicting that unemployment in the US will rise again as companies downsize their workforces to remain competitive. Already, some companies are terminating workers in large numbers. Some of those workers are immigrants and the challenges facing these workers are potentially more serious than for their American counterparts.

Employers engaged in layoffs also are faced with considerable challenges including managing the legal aspects involved in the downsizing process while trying to do their best to help their employees transition to new employment. Generally, most employers are well aware of their obligations under the labor and employment laws applicable to lay off situations. Likewise, most employers understand the need to provide their employees information on the layoff process, including information on benefits continuation, how to apply for unemployment compensation, and, in some cases even provide career transition counseling and job search services for their employees. However, in the case of employers that employ alien workers, the individuals responsible for managing the downsizing process often overlook the significant immigration-related consequences impacting both the employer and its alien employees when layoffs take place.

This article is intended to provide guidance to employers and their foreign national employees in dealing with layoff situations. While there is no way to “sugarcoat” being laid off or having to terminate employees, properly attending to immigration matters during the downsizing process can at least prevent making a bad situation even worse.

At the outset, however, it is important to stress that when an employee learns he or she is to be laid off, an immigration lawyer should be contacted immediately to discuss taking the necessary steps to ensure the worker remains in status and that decisions are not made that will have unnecessarily harmful effects. Employers terminating workers should also consider lining up immigration counsel to advise employees as one of the services provided to workers being terminated.

What are the immigration related consequences of layoffs on alien employees in non-immigrant status?

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

Nonimmigrant work visas are generally issued for the specific purpose of employment with a particular employer. Thus, a nonimmigrant residing in the US under one of the temporary work visa categories is legally authorized to remain in the US only as long as they are employed with the particular employer noted in their visa application. If the employee is laid off, they immediately lose their visa status. As a result, employers that lay off nonimmigrant employees with little or no notice put these individuals in the difficult situation of having to quickly find an alternative visa status in order to remain legally in the US. If the nonimmigrant employee cannot secure an alternative status, he or she must choose between remaining in this country illegally or leaving everything behind and returning to their home country to possibly seek a new visa status from abroad.

If the nonimmigrant is married, or has children, his or her dependants must also leave the country as their legal status is derived from the visa status of the nonimmigrant worker. This can be particularly hard when, for example, children must be pulled out of school in the middle of the school year or someone in the family is receiving regular treatment for a medical condition. And returning to legal status once an employee becomes illegally present can be extremely difficult.

Securing an alternative visa status without notice, or with only a little notice,  is not easy, but the employee needs to act very quickly once he or she learns of the termination. Even if the nonimmigrant is fortunate enough to secure an alternate employment offer, he or she will not be permitted to begin work for the new employer under most nonimmigrant work visa categories until a new visa petition is actually approved, something which could take up to several months. An exception is available to those working under the H-1B visa category. Those workers may normally start work for a new employer immediately upon filing a new visa petition.

A more likely scenario is for the employee to file to change to visitor status. This strategy will allow the worker to remain legally in the US, though not authorized to work. As long as the application is filed while the worker remains employed, the worker will remain in status for up to 120 days while the visitor change of status application is pending.  The worker will also have to file a new non-immigrant application once a new position is found.

For those previously holding an H-1B filing for a new H-1B, H-1B “portability” remains available in most cases and work for the new employer can begin immediately upon filing the new H-1B change of status petition. One additional good piece of news for H-1B visa holders, however, is that if a worker was counted against the H-1B cap for the prior position, the worker should not need to be counted again and the new employer does not need to go through the H-1B lottery.

L-1, E-1 and E-2 applicants very often need to find a new visa category to remain in the US. Because L-1s are intracompany transfers and must be working for an employer that employed them for a year outside the US within the prior three, the odds are pretty low that they will qualify to work for a different employer in the same status. So changing to another non-immigrant category will likely be necessary. E-1 and E-2 status is tied to working for an employer with the same nationality as the employee. In order to remain in the E-1 or E-2 status, the worker must find another employer from his or her country and be employed in a managerial, executive or essential skills position. Like the L-1 employee, a laid off E-1 or E-2 worker will probably need to switch to another non-immigrant visa category. TN and E-3 workers are in better shape because if they can find a job in the same occupation and, in the case of an E-3, are paid the prevailing wage, their status can continue with a new employer.

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

What should a non-immigrant employee do if they fall out of legal status?

If the nonimmigrant employee is unable to secure a legal visa status after being laid off, any time spent out of status has the potential to create significant future problems that the nonimmigrant often does not realize. Even minor periods of time spent out of legal status can render the nonimmigrant ineligible for certain immigration benefits. For example, in the final stage of the green card process, an individual usually has the choice of completing the process from within the US (referred to as adjustment of status) or at the US Consulate located in their home country. However, individuals who have spent any period of time out of status are potentially not eligible to adjust status and must endure the disruption of having to return home to complete their green card process. Furthermore, USCIS has recently begun cracking down on workers who engage in any unlawful employment even after an adjustment application has been filed. An adjustment applicant must therefore be very careful to make sure that he or she has a valid employment authorization card just in case he or she loses their non-immigrant work status.

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

Persons in this situation may be able to convince an examiner to exercise discretion and approve a late-filed change of status petition based on extraordinary circumstances beyond the control of the alien. But a prudent person should assume the decision will be no and should be cognizant of the fact that the longer a person remains out of status, the harder it will be convince a consular officer to approve a visa.

Is there a grace period allowing a period of time for a worker to find a new position without being considered out of status?

No. Workers terminated from their positions are considered out of status immediately upon their termination unless they have a change of status petition filed before they are terminated. During the recession in 2001, USCIS’ Efren Hernandez III, the then Director of the Business and Trade Services Branch, announced that the agency did not provide or recognize any “grace period” for maintaining H-1B status. While USCIS suggested it was considering allowing a 60 day grace period in a June 2001 memorandum, nothing ever came of the proposal and no grace period is available to laid off H-1B workers.

There is a ten day grace period following the expiration of the admission period noted on the Form I-94, but this would not apply to prematurely terminated workers.  

What are the immigration related consequences of layoffs on alien employees with pending green card applications?

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

The LPR process is predicated on the idea of granting an alien permanent work authorization to work for a particular employer in a particular position. Thus, alien employees who are laid off during the first two steps of the LPR process cannot continue with their application, and must restart the entire process with another employer if they remain interested in securing LPR status. Alien employees laid off during the third step of the process may or may not be able to continue the LPR process depending on their situation.

Historically, alien employees could not switch employers before their status was adjusted without risking invalidation of their underlying immigrant petition. However, under a law passed in October 2000, an alien employee whose adjustment of status application has been pending for over six months can now switch employers without validating his or her immigrant petition as long as they will be working in a position similar to the position noted in their labor certification and immigrant petition. Obviously, during a recession, finding work in one’s occupation may not be easy and if a worker accepts employment in field not closely related to the field that served as the basis for the green card application, adjustment portability may not be available. Note also that the worker must be working in the new position at the time the adjustment petition is adjudicated.

What are the immigration related consequences of layoffs on alien employees who are already permanent residents?

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

What are the immigration related consequences of layoffs on employers employing foreign nationals?

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

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

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

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

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

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

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

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

Employers that lay off workers could also jeopardize permanent residency applications pending for the company’s workers. With USCIS and DOL examiners now regularly searching the Internet for information on petitioners and beneficiaries, practitioners are already reporting more and more denials of PERM and immigrant visa petitions based on examiners’ finding media reports of downsizing at the employer. Employers will need to be prepared to document that the sponsored worker is not employed in an occupation where US workers have found themselves terminated.

What are some proactive strategies for preventing negative immigration consequences for employers and employees during downsizing?

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

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

Some progressive employers will provide laid off workers with access to an immigration lawyer to assist the worker in maintaining status. The cost associated with this may be offset for some workers by not having to reimburse the workers for transportation costs to their home country since proper counseling may result in the worker not having to leave the country at all.

2. Laid off workers should be very careful not to allow themselves to fall out of status even for a day. If a new work status application cannot be filed before being terminated, the worker should consider filing an application to change to visitor status. Interviewing for a new job is an acceptable visitor visa activity.

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

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

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