4. H1Bs and Relocation Expenses
The Department of Labor (DOL) Administrative Review Board issued a Final Decision and Order on July 30, 2004 finding that a company's "loan" to its employees for certain relocation expenses is prohibited under law. The case is "Administrator, Wage and Hour Division, U.S. Department of Labor versus Novinvest, LLC." In this case, the employer argued that the loans to H1B employees were forgiven by the company at a rate of one-twelfth of the relocation expense amount each month over the first year of the H1B status holder's employment with the company. Novinvest required its employees to pay any unpaid portion of the loan if they left the company within the first year.
The company claimed that it had invested considerable time, effort, and financial resources of $5,000 per employee in organizing, assisting, and transitioning these employees to life in the United States. The employees never actually received $5,000 or any portion in liquid funds. The company was not able to document expenditures of $5,000 for each employee to the DOL.
In the Novinvest case, the court found that the H1B status holders were not required to reimburse any portion of the $5,000 loan even though they left the company within the first year. The Judge found that the $5000 loan or investment fee constituted an impermissible early termination penalty and held that the employer had violated its wage obligations by charging the employees the $5,000 as a penalty fee. The Order also indicated that the DOL may still choose to impose civil penalties against the company for its willful failure to meet a condition of a Labor Condition Application (LCA) and for its willful misrepresentation of a material fact on the LCA attestation.
Although most cases are decided based on the facts of that particular case, any decision could impact future cases with similar fact patterns.
