H-1B Employer Held Personally Liable for Over $1 Million in Back Wages

Last week, the U.S. District Court for the 6th Circuit affirmed an administrative decision holding Dr. Mohan Kutty personally liable for civil penalties and back wages, including expenses incurred by the physicians he hired to staff his medical clinics to obtain their J-1 waivers and H-1B status. Kutty v. DOL, No. 11-6120 (6th Cir. 2014).  Kutty was ordered to pay $1,044,294 in back wages and J-1 and H-1B expenses to 17 physicians, as well as civil penalties of $108,800.

Several of the physicians complained they were not receiving the salaries recorded in the Labor Condition Applications (LCA) supporting their H-1B filings. In response to the complaint, Kutty stopped all salary payments and later fired the complaining physicians.The evidence showed that Kutty utilized several “sham” corporations to employ the physicians. Accordingly, it was appropriate to deprive Kutty of the financial protection afforded by incorporation and hold him personally liable.

Two of the physician claims affirm basic law for the management of H-1B workers.  First, the minimum salary, called the “prevailing wage,” and hours of work are set by the Labor Condition Application filed with United States Citizenship and Immigration Services and repeated in the H-1B petition.  Once a petition is granted, these become mandatory for the term of employment, and the worker cannot be paid less or for fewer hours than are set in the LCA.  Second, the fees and costs for obtaining H-1B status are considered employer business expenses and cannot be deducted from the salary paid to the H-1B worker if such a deduction would bring the salary below the prevailing wage set in the LCA.  USDOL’s position on this issue is stated in DOL Wage & Hour Fact Sheet #62H which is located at www.dol.gov/whd/regs/compliance/FactSheet62/whdfs62H.pdf

Kutty expanded this interpretation to include the fees the physicians had to pay to obtain J-1 waivers. A J-1 waiver makes a worker eligible for H-1B status without the usual two-year return to their home country following completion of their studies in the U.S. J-1 waivers can be granted when the physician agrees to work for 36 months in a rural or under-served specialty area in the U.S.  Under Kutty, the necessity to enter into an employment agreement with a U.S. employer petitioner made this an employer’s expense as well.

The facts of this case are particularly egregious, and some of the findings will therefore not have general application in future H-1B practice.  However, the basic holdings on the mandate to pay the prevailing wage reported in the LCA during the full term of the status and the USDOL’s position on the payment of H-1B filing and processing fees by the employer were strongly affirmed. Members with questions about this decision should contact Chris Bauer with MSEC Immigration Services.