Last month, the U.S. Department of Justice (“DOJ”) arrested and charged Pradyumna Kumar Samal, CEO of two Washington State information technology companies, Divensi, Inc. and Azimetry, Inc., with visa-fraud.
The DOJ alleges Mr. Samal initiated and oversaw a multi-year scheme involving the submission of forged documents to the U.S. Citizenship and Immigration Services (“USCIS”). The DOJ alleges Mr. Samal petitioned for H-1B workers under false pretenses and then benched those workers until they found a client project after their petitions were approved.
It is common for large technology companies to rely on third party companies to staff select projects. In a previous post, I detailed a list of documents the USCIS requires from employers who seek to place their H-1B workers on the premises of end clients. Two essential documents among those are:
- Detailed statements of work (“SOWs”) or work orders specifying the duties, qualifications, duration, and hours of the position, signed by an authorized official of the ultimate end-client company where the worker will actually perform the work; and,
- Detailed letter written by an authorized official of the ultimate end-client company confirming the name of the H-1B worker, the position’s duties and the qualifications required to perform those duties, the duration of the assignment, and the name and title of the end-client employee who will oversee the work arrangement, and acknowledging that the end-client is not responsible for the H-1B worker’s wage, benefits, placement, or termination.
The underlying purpose of requiring the above documents is to get the end client to confirm that the H-1B worker has authorization to be on its physical premises and that the worker will perform tasks that are specific and complex, rather than general and menial. The fundamental policy consideration here, of course, is to protect the American worker.
In adjudicating H-1B petitions, USCIS adjudicators are always on the lookout for fraud indicators. There are any number of indicators that can lead an adjudicator to refer the case to the fraud detection team. In some cases, it is incomplete, inconsistent, or misstated information, including excessive blanks and inflated figures. In other cases, it is insufficient finances, inadequate office space, wage violations, or questionable occupations or educational credentials.
The DOJ’s investigation into Mr. Samal’s alleged activities started three years ago and appears to have identified approximately 200 cases involving forged and/or fraudulent SOWs and client letters submitted to the USCIS. According to the complaint against Mr. Samal, those documents appeared to have been signed by end clients’ senior executives even though they were not. The USCIS approved those cases when they were filed, but it is possible inconsistencies discovered later triggered the investigation.
One such inconsistency, according to the DOJ, was the “bench-and-switch” scheme. The DOJ’s investigation appears to have discovered that Mr. Samal’s companies did not pay those H-1B workers whose petitions were approved by the USCIS with the help of forged and/or fraudulent documents. These workers had to remain on the sidelines until there were projects for them at actual end clients. This practice is known as “benching.”
Benching occurs when the employer fails to pay the employee for nonproductive time or pays the employee less than the full-time rate for such time. This is true even where the employer has projects and work opportunities for the employee. The U.S. Department of Labor (“DOL”) and USCIS collaborate to audit and evaluate employers who they suspect of benching their employees. Employers who violate the DOL rules about benching may be disciplined by the DOL with significant financial penalties, including having to pay all back wages owed, and be barred from participation in the H-1B program.
Legally-authorized data-sharing of financial records between federal and state government agencies increases the likelihood of the federal government catching employers who bench their H-1B workers. To illustrate, let us assume that a hypothetical employer, Acme Corporation, pays a hypothetical H-1B employee, Jane Doe, a gross monthly wage of $7,000 when she is working on a three-month project at an end client. Acme reports Jane’s full wage in its quarterly wage filing with the state. When her project ends and while Jane is looking for another project, Acme benches her and pays her a gross monthly wage of $2,000. Two months later, Jane finds a new project and Acme resumes paying her the gross monthly wage of $7,000. Under this scenario, Acme’s quarterly wage reports would show a temporary decrease in Jane’s wages for two months and would almost certainly attract the attention of federal investigators looking into H-1B benching practices.
The DOJ investigation into Mr. Samal’s suspected practices offers two fundamental lessons for employers who hire H-1B workers or are considering hiring H-1B workers:
- First, make sure you meet the height requirement before getting on the roller coaster. As coveted and highly qualified as the majority of H-1B workers are, H-1B sponsorship is not appropriate for every company. It requires the company prove its existence, operations, and financial strength. New companies who need to be operationally nimble and cannot afford adequate office space are not good candidates. Similarly, companies that want to hire only entry level or part-time employees are better off waiting until they have matured and expanded. I regularly counsel smaller companies, provide them with honest advice and a blueprint for growth, and welcome them back when they are ready to file their first H-1B petition.
- Second, once on the rollercoaster, fasten your seatbelts and hold on tight…each time. The H-1B process is not for the fainthearted employer. It requires careful planning and ample execution time. Even when the immigration laws and regulations remain unchanged, the interpretation of those laws varies from time-to-time. Companies that place resources at end clients must communicate with end client representatives regarding what they will need from them and when. They should also be judicious about making any promises on when resources can start on projects. Processing times for H-1B petitions fluctuate, and the ability to premium process those cases (expediting them by paying the USCIS an additional fee) is periodically suspended, as is presently the case. Lastly, companies need to be prepared for a site visit or an audit from the USCIS, the DOL, or U.S. Immigration and Customs Enforcement (“USICE”) to examine their physical premises, wage and tax records, and I-9 files that document every employee’s eligibility to work.
According to estimates published by the Economic Policy Institute in 2017, H-1B workers represent roughly one percent of the U.S. labor force. Yes, just one percent. The rhetoric, however, together with stories of alleged fraud by H-1B employers, create a disproportionate picture and obstacles to business.
The takeaway for H-1B employers from Mr. Samal’s case? Do not use H-1B workers unless and until you know well the laws and regulations and unless and until you are fully capable and prepared to abide by them.