The rules regarding an employer's ability to seek reimbursement of attorney fees and costs associated with hiring nonimmigrant foreign nationals and sponsoring foreign nationals for permanent residence have evolved over the last several years.  This summary highlights those H-1B Specialty Occupation Worker petition and PERM Labor Certification Application fees and costs that must be borne by the employer, and the fees and costs that may be reimbursed by the foreign national if the employer opts to seek repayment. 

Employer's Business Expenses

Examples of Expenses that May not be Recouped.  When the Department of Labor amended the federal regulations in 2001, it stated that an employer may not seek recoupment of H-1B related fees and costs for the "employer's business expenses."  The DOL provided examples of such expenses as including: [1]

• tools and equipment;
• transportation costs that are incidents of and necessary to employment;
• living expenses when employee traveling on company business; and
• attorney fees and costs connected to performance of H-1B program functions required to be performed by the employer, specifically including the preparation and filing of Labor Condition Application and H-1B petition.

Deductions that Are Authorized.  Deductions of some fees and costs are expressly authorized by the DOL regulations.  These include deductions that:

• are authorized by United States law, such as income tax and FICA;
• are authorized by a collective bargaining agreement or are reasonable and customary in the occupation or area of employment;
• are made pursuant to a voluntary, written agreement, principally benefiting the employee and would not amount to a recoupment of a business expense;
• are not in excess of the fair market value or actual cost of the matter covered; and
• do not amount to more than 25% of the employee’s disposable earnings for a work week.

Other Costs that the Employee May Pay.  The supplementary comments to DOL’s regulations also identify some fees and costs that are not business expenses and that may be paid by the employee.  These include:

• translation costs and other fees associated with the visa process;
• legal fees associated with obtaining visas for the employee’s family members; and
• legal obligations of the employee that arise in connection with his or her residence and employment in the United States.

The H-1B Filing Fees.  DOL’s regulations explicitly prohibit an employer’s recovery of some of the H-1B petition-related filing fees and implicitly prohibit the recovery of other filing fees.  Therefore, we recommend that employers refrain from seeking recovery (or payment by the employee) of:  (i) the $460 USCIS petition filing fee; (ii) the $1,500 ACWIA[2] training fee; and (iii) the one-time $500 fraud prevention and detection fee – all of which must be submitted with a new H-1B petition.

The Premium Processing Fee.  In 2001, U.S. Citizenship and Immigration Services (USCIS) enacted regulations making premium processing available for H-1B applications.  An employer is not responsible for the $2500 filing fee and any other fees associated with premium processing if the employee is the party requesting and benefiting from the premium processing.  If the employer chooses to request premium processing for its benefit, then the costs must be borne by the employer.

Challenges to DOL’s Position.  Challenges to the inclusion of attorney fees and costs as an employer's business expense have been unsuccessful.  In 2003, the Administrative Review Board for the Department of Labor issued a published opinion, imposing a wage assessment on an employer who failed to pay the attorney fees and costs for the H-1B processing for its employees. [3]  The employer argued that it was not responsible for the attorney fees associated with the H-1B program because such fees are paid by employees to serve the employees' interests. The Board rejected the employer's argument, holding that "attorney fees and other costs connected to the preparation and filing of the H-1B petition are specifically considered to be a business expense of the employer."

Recovery Not Resulting In Depression of the Employee's Required Wage

An employer’s recovery of some fees and costs considered business expenses is possible but is subject to restrictions.  The DOL’s comments to its 2001 regulations state that an employer cannot impose business expenses on a foreign national H-1B employee "to the extent that the assessment would reduce the H-1B worker's pay below the required wage."

Consistent with those comments, DOL’s regulations provide that an employer that depresses an employee's wage below the required wage by imposing business expenses on the employee causes an unauthorized deduction from the employee’s compensation and is considered to be non-payment of the required wage.  In the event of a DOL investigation, such a wage depression could result in a wage assessment.  If the employer’s conduct was willful, the employer could be subject to other civil penalties and/or disqualification from the H-1B program (and possibly other immigration programs, as well).  Given the substantial risk associated with seeking recovery from a foreign national H-1B employee, an employer may judge it to be prudent to avoid these potential losses and penalties by not attempting recovery of the fees and costs associated with the H-1B petition.

Liquidated Damages

The comments to DOL’s regulations specifically state that "there is no basis for distinguishing attorney fees and other expenses in connection with these filings from other expenses which may be permitted, under state law, as liquidated damages."[4]   However, while the regulations contemplate recovery for liquidated damages, such recovery ultimately may not be successful.  The Administrative Review Board recently denied such a request, even when the employer had obtained a state court judgment against the former employee, finding that the stated "investment fee" deducted from the wages of former employees was not legitimate liquidated damages, but instead was an early termination fee expressly prohibited by the regulations and required the employer to compensate the former employees for the judgment amounts assessed.[5]  An employer considering seeking liquidated damages should carefully weigh the potential costs of seeking such relief.

Explicit Prohibition On Recovery Of Fees and Costs For Labor Certification

In July 2007, the DOL amended its regulations governing the PERM labor certification application process for the permanent employment of a foreign national.[6]   The regulations specifically prohibit an employer’s recovery of the costs and fees associated with labor certification applications.[7]   The comments to DOL’s regulations state that a transfer of financial responsibility signals the preselection of the foreign national beneficiary, which is contrary to the requirement of open recruitment and full consideration of United States workers as part of the PERM labor certification application exercise.

DOL’s regulations allow a foreign national to pay for his or her own attorney fees in connection with the Labor Certification process, but only where the attorney is representing the foreign national in his or her individual capacity. [8] If the foreign national and the employer are represented by the same counsel, the employer must pay the attorney fees and costs.

Exception To The Rule: Third Party Payment

DOL’s regulations offer one exception to the requirement that an employer must pay the legal fees and costs for the labor certification process.  If a third party has an established business relationship with the employer and would benefit from the work to be performed by the prospective employee, then the third party may share in the fees and costs associated with the labor certification application.[9]  The comments to the regulations provide an example of a circumstances where such third party payment would be permitted – where a physician is hired by a medical center but is dividing his or her appointment between the medical center and university, the medical center may be reimbursed by the university for fees and costs proportionate with the amount of time spent per work week at the university.

An Employer May Recover Fees And Costs For the I-140 Immigrant Petition and the I-485 Adjustment of Status Stages

The regulations do not prevent recovery of costs and fees for the I-140 Immigrant Petition on behalf of the foreign national or the I-485 application for adjustment of status.  In fact, the comments specifically state that attorney fees and costs outside of the labor certification process “are not part of this rulemaking.”[10]

Therefore, while the cost for the first step of the permanent residence process must be borne by the employer, the employer may seek recovery for the fees and costs associated with the second and third steps in the process.

Issues Arising Regarding Reimbursement Agreements

Employers should (i) specifically exempt PERM attorney fees and costs in any new reimbursement agreements that it asks employees to sign as a condition of starting the PERM process and (ii) not seek reimbursement of PERM fees and costs going forward.  Employers should include language in their employment agreements with foreign nationals being sponsored for a PERM labor certification in order to preserve a later claim seeking reimbursement of fees and costs of the labor certification costs in the event that the DOL’s position changes.  Sample language might reads as follows:  "the employer will bear the legal fees and costs for the first PERM labor certification stage of the three-step process unless the Department of Labor changes or is required to change its regulations to permit employers to seek reimbursement for such labor certification fees and costs."  Use of this or similar language might preserve the employer's possible future claim to reimbursement.

The information in this document is provided for informational purposes only and does not constitute legal advice.  These information is intended, but not promised or guaranteed, to be current, complete, or up-to-date and should in no way be taken as an indication of future results.  Transmission of the information is not intended to create, and the receipt does not constitute, an attorney-client relationship between sender and receiver.  The content of this document is offered only for general informational and educational purposes and is not offered as and does not constitute legal advice or legal opinion.  

©  by Lindsay Chichester, Esq. with editorial contributions by Douglas Halpert, Esq., 2010