June 23, 2015
Introduced in a separate article, the new standard for avoiding wage liability to H-1B employees (without terminating them) created in Gupta vs. Compunnel raises a serious question. Now, to escape liability in this way, employers must first have “work assigned” to the employees in question. Because, the reasoning goes, the employees must be nonproductive due to “conditions unrelated to the employment,” and if there is no work assigned it could be true that the lack of assigned work is the true cause of their nonproductive status. If it is, then the employer’s case for escaping wage liability cannot be accepted (and the burden of proof for such a case is on the employer).
Thus, what may count as “work assigned” in this context becomes of consequence. Indeed, it was a central focus in a case recently argued by Attorney Gus Shihab on behalf of an affected employer: Administrator vs. Parsetek. Parsetek is a tech consulting agency in Virginia. Employee S.M. was hired by Parsetek with an effective and prevailing wage of $51,376 per year–but was never placed on work assignment due to her being unavailable for such, but was only given a bona fide termination many months afterwards. The case revolved around Parsetek’s wage liability in light of the Gupta standard despite her never having completed any work on its behalf.
In the first two months of her being with Parsetek as an H-1B, S.M. was interviewed for a three-year assignment that would have resulted in significant profit for Parsetek. However, nothing came of it. Parsetek claims that it was because she continuously asked to delay the start date of the assignment. Not long after that, S.M. informed Parsetek that she would be leaving Virginia to join her boyfriend in Chicago. This alone did not cause serious alarm because companies like Parsetek can place workers virtually all over the nation. So, it continued to market her to several end-client employers. This went on for seven months, with S.M. seeming to cooperate. However, her responses grew less and less frequent.
Then, she stopped replying altogether, and her phone line was apparently disconnected. Parsetek felt that its obligation to pay her ceased at that point. Knowing that some wages were due (because of H-1B regulations) when S.M. was apparently ready to go to work (while she was at least partially responsive), Parsetek paid her $16,000. It didn’t hear from S.M. at all for almost a year after this, and when it did it was only when she was requesting documentation to take home out of the country. Parsetek then completed a bona fide termination.
Eight days later, S.M. contacted the Wage and Hour Division (WHD) at the Department of Labor (DOL) complaining that Parsetek had not paid the required wage. After a brief investigation, the WHD Administrator very much agreed with S.M., and declared that Parsetek owed its former employee an additional $58,629.80. This figure was arrived at by doing none other than deciding that S.M. was owed the prevailing wage rate for her entire “employment” at Parsetek (minus the $16,000 that was already paid). Parsetek argued that this was not only inequitable but also a mischaracterization of regulations.
However, Administrator’s counsel argued that it was simply applying Gupta. Its case was that Parsetek should pay because it couldn’t prove that S.M. caused herself to be unavailable for work because, in turn, it had no assigned work for her to accomplish. The argument has a certain allure to it. How can one know that another doesn’t want to work when there is no work to complete anyway? Nonetheless, the judge in this case agreed with Gus Shihab that no matter the soundness the Gupta argument, it simply doesn’t apply in that way. As a consulting company, Parsetek generally doesn’t assign actual work to most of its employees. Instead, it assigns them to end client companies that will in turn assign work of their own.
The Gupta argument must thus apply differently to consulting companies. The judge further agreed, saying that in this case, attempting communication with and trying to market an employee for an assignment or position with an end-client is sufficient for the Gupta standard. When an employee stops communicating with its consulting agency employer, such marketing becomes impossible. Thus, the judge found that Parsetek fulfilled its requirement to escape wage liability in showing that S.M.’s nonproductive status was “due to conditions unrelated to the employment.” Specifically, he found that Parsetek’s wage liability ceased when S.M. stopped responding.
Parsetek didn’t escape without some liability, however. The judge found that during the seven months of H-1B status that S.M. was at least “marginally responsive,” she was due her prevailing wage. This translates to $27,268.80 minus the $16,000 already paid to S.M., meaning that Parsetek still has to pay an additional $11,268.80. But the DOL’s being incorrect in declaring that Parsetek owes $50,000 more is a win for companies like it and the American tech industry that they support. The clarification of the Gupta standard found in Administrator vs. Parsetek allows employers to hire H-1B workers with the peace of mind of knowing that uncooperative employees cannot threaten them with the harsh choice between facing steep wage liability and losing a scarce resource through termination (due to the H-1B cap).