Tag: U.S. Department of Labor

You Are Sponsoring a Foreign National Employee for Permanent Residency, Can You Clawback Some of the Fees?

Companies usually hire a foreign national who requires visa sponsorship because they cannot find a U.S. worker with those skill sets, which is frequently in the STEM fields. However, visa sponsorship comes with significant costs to the employer. Employers may be able to recover a portion of the immigration sponsorship fees by implementing what are called “clawback” provisions into their employment agreements. Clawback provisions are terms in the employment agreements that, in the event of a resignation by the employee before a certain date, require the employee to reimburse the employer for a portion of the costs or fees associated with his or her visa sponsorship.

Not All Visa Fees Can Be Clawed Back

But first, it’s important to understand which sponsorship fees and costs are potentially recoverable and which are prohibited from being “clawed back.”

  • H-1B Petition: Because these visas have a prevailing wage set by the U.S. Department of Labor (DOL) a H-1B employer may not clawback any attorney fees or government filing fees used to obtain the H-1B petition approval by U.S. Citizenship & Immigration Services (USCIS).
  • Other Visas: The same restriction applies to the Australian E-3 visa and the Singapore/Chile H-1B1 visas as well as the H-2A, H-2B, and J-1 visas.
  • PERM Labor Certification Sponsorship for Permanent Residency: PERM Is the most common method for an employer to sponsor a foreign national employee for permanent residency (green card). It is done by conducting recruitment and proving to DOL that no qualified U.S. worker applied for the position. An employer is required to pay for all of the fees and costs associated with the PERM process.
  • I-140 Immigrant Petition: After DOL certifies the PERM application and agrees that no qualified U.S. worker is available, the employer must file an I-140 immigrant petition with USCIS. The attorney fees and costs for the I-140 may be clawed back. The purpose of the I-140 immigrant petition is for the employer to prove to USCIS that the foreign national has the required education, experience and special skills outlined in the PERM filing with DOL. In addition, the I-140 includes financial documents showing that the employer has the ability to pay the offered wage.
  • I-485 Adjustment of Status to Permanent Resident filing: The employer may clawback the fees and costs associated with the I-485 adjustment of status application (green card).

Practice Pointers

  • Still At Will: The clawback provisions should be in writing. It should also indicate that the employment is still at will, if applicable.
  • Final Paycheck: The majority of states, including California, do not allow an employer to deduct anything from a final paycheck without the express consent of the employee. This includes fees and costs pursuant to the clawback provision.
  • Deterrence: Given that an employer cannot clawback from the final paycheck and suing a former employee to collect the amount in controversy is not always practical, a clawback provision can be used as a deterrence for early departure.

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Copyright © 2024, Sheppard Mullin Richter & Hampton LLP.

New DOL Salary Threshold for Most White-Collar Exemptions Is Now in Effect

Update July 1, 2024: The U.S. Department of Labor’s new rule on the required salary threshold for employees to qualify as exempt from overtime is now in effect as of July 1, 2024. Although the federal district court for the Eastern District of Texas issued an injunction blocking enforcement of the new rule against the State of Texas as an employer on Friday, June 28, 2024, that injunction does not apply to other employers, including private businesses. Thus, the new salary thresholds for exempt status, as detailed below, are in effect nationwide. Other lawsuits challenging the regulation remain ongoing, and should continue to be monitored for any further developments.

The U.S. Department of Labor (DOL) has issued a final rule that significantly raises the required salary threshold for many salaried exempt employees starting July 1, 2024. Under this final rule, issued on April 23, 2024, the guaranteed salary that most employees must receive to qualify as exempt from the overtime rules will increase dramatically over the next nine months. Effective July 1, it will jump from $35,568 per year to $43,888 per year; and then just six short months later, on January 1, 2025, it will jump to $58,656 per year.

Under the Fair Labor Standards Act, employees who work in executive, administrative, professional, and certain computer positions must generally meet both the salary basis test and the job duty requirements to be classified as exempt from the overtime rules. In addition to being paid on a salary basis (which means there can be no deductions from salary, subject to certain limited exceptions), the threshold salary is currently $684 a week, amounting to $35,568 annually. The final rule raises the threshold for salaried employees significantly, according to the following schedule:

  • Effective July 1, 2024: $844 per week (equivalent to $43,888 per year)
  • Effective January 1, 2025: $1,128 per week (equivalent to $58,656 per year)
  • Effective July 1, 2027, and every three years thereafter: To be determined based on available earnings data

In addition, the new rule increases the total annual compensation threshold for highly compensated employees from $107,432 per year to $132,964 per year effective July 1, followed by yet another increase to $151,164 per year effective January 1, 2025. This will result in an increase of nearly $44,000 per year to the salary threshold necessary to qualify for the highly compensated employee exemption.

It is widely expected that various business and industry groups may file suit to attempt to block these changes from taking effect. Many employers may remember that a similar scenario occurred in 2016, when the DOL under the Obama Administration proposed a large increase in the salary threshold for these white collar exemptions, before that increase was blocked by court action. If the final rule issued by the DOL is not blocked through court action, it will mean significant changes for employers in compensation structure, as more employees nationwide will qualify for overtime pay unless their salaries are increased over the new threshold.

Employers should immediately review their workforces to determine what changes, if any, may be necessary if the final rule takes effect. Possible considerations include:

  • Raising the annual salary of employees who meet the duties test to at least $43,888 as of July 1, and $58,656 as of January 1, 2025, to retain their exempt status;
  • Converting employees to non-exempt status and paying the overtime premium of one-and-one half times the employees’ regular rate of pay for all overtime hours worked; or
  • Converting employees to non-exempt status and eliminating or reducing the amount of overtime hours worked by such employees.

Similar considerations should be undertaken with highly compensated employees. While it is wise to review pay practices proactively and identify potential changes that may become necessary, employers may wish to continue to monitor legal developments prior to actually implementing such changes. As employers will recall from 2016, significant changes can occur between the announcement of a final rule and the date on which it is scheduled to become effective.

Employers are encouraged to consult with legal counsel to discuss their options and strategies for implementing these changes, if necessary.

© 2024 Varnum LLP