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Tech staffing company’s failure to comply with H-1B notice-posting requirements not willful

By Lisa Milam-Perez, J.D.

A federal district court in New Jersey granted a technology staffing company’s motion to set aside a DOL Administrative Review Board determination that the company willfully failed to comply with H-1B notice-posting requirements at required work sites (CAMO Technologies, Inc v Solis, October 18, 2013, Martini, W). Concluding that the ARB’s finding was arbitrary and capricious, the court held that, at most, the evidence indicated the company was negligent. It credited the testimony of a company administrator, who asserted a genuine belief that simply documenting its efforts to post Labor Condition Application (LCA) notices at the worksites of third-party clients showed compliance with the statutory requirements. Accordingly, the court reversed an order imposing $192,625 in civil penalties and a mandatory two-year disbarment from the H-1B program.

CAMO Technologies is a New Jersey-based consulting company that provides workers with computer programming and technology expertise. An H-1B dependent employer, approximately 90 percent of CAMO’s workforce (42 out of 48 employees) is composed of H-1B nonimmigrant workers — foreign nationals who are admitted to the United States for a temporary period of time for a specific purpose, such as to work in “specialty occupations” or study, provided their employer files proper applications with the DOL and Department of Homeland Security. Many of CAMO’s employees work intermittently in the company’s New Jersey offices, but they also work at the facilities of CAMO’s direct clients for whom the company provides information technology services. In a large number of cases, CAMO’s direct clients are other information technology consulting companies that, in turn, place CAMO employees alongside their own staff at the locations of their clients. CAMO had no control over these secondary clients.

Notice-posting requirement. An employer that seeks H-1B status for an employee or prospective employee must submit a Labor Condition Application (LCA) to the DOL. Also, notice of the filing of the LCA must be posted — a requirement that seeks to protect American workers from displacement by nonimmigrant H-1B workers. The employer can satisfy the LCA notice requirements by “posting a notice in at least two conspicuous locations at each place of employment where any H-1B nonimmigrant will be employed (whether such place of employment is owned or operated by the employer or by some other person or entity).”

The relevant regulations permit the DOL to assess a $5,000 penalty for “willful” violations of the LCA notice requirements; the regulations also require DHS to debar an employer who commits a “willful failure” to comply with certain H-1B program requirements from further immigration petitions for its employees for at least two years.

Investigations. The DOL first began to investigate CAMO’s predecessor in 2001 for compliance with H-1B statutory and regulatory requirements. The predecessor’s business director, who continued working for CAMO and was the key point person for its H-1B visa administration, was not involved in this function for the predecessor at the time of the initial DOL investigation because she was out on maternity leave. Nonetheless, the DOL investigator informed her by email of the notice posting requirements, including the requirement that notice of filing of an LCA form be posted conspicuously “at the places of employment.” As the investigator’s email explained, that means that “if you have consultants working at AT&T in Kansas City, Mo you must post the notice at AT&T in Missouri.” It was the DOL’s position, the investigator noted further, that an H-1B employer should refuse to place workers “with a client that balks at helping you meet this requirement.” The notices posted in CAMO’s New Jersey facility didn’t meet the notice-posting obligation, the investigator advised, urging the predecessor to immediately post at all client worksites — and also “to document any efforts you made to retroactively comply with this obligation.” The predecessor indicated it would immediately communicate with clients about the posting requirement, asking them to post the notice of LCA filing.

Subsequent investigations ensued in 2005 and 2010 following complaints by terminated employees. The DOL found that CAMO failed to post notices of H-1B visa applications at appropriate work sites 67 times between 2006 and 2009. CAMO protested that secondary clients were refusing to post the required notice, insisting they were under no obligation to do so.

Resistance. After another investigation in 2010, the business director said she began to personally ensure that postings were in fact effectuated at the secondary client worksites, noting the ongoing, “widespread belief” among these clients that postings were not mandated. “Their reaction [to my insistence on an LCA posting] is primarily that I don’t know the regulation,” she testified. “They say that they . . . file numerous H-1’s, they place their H-1’s at the end client locations, they have never had to post [except for in] their office for 10 days. I have been told that the end client in certain cases refuses to post because the person that’s coming to work at the location is not their employee. They have never filed an H-1 for them, they are not on their payroll, a full-time employee, so there is no reason for them to post. I have also been told that the company that we, for example, would contract with, our client says that actually it’s not supposed to be posted at the end client location, it’s supposed to be posted with our client, which is the company that we contract with. . . . [M]ost of the companies, whether it’s our client or the end client, are not aware . . . this posting is needed.”

Enforcement proceedings. Notwithstanding these efforts in the face of third-party resistance, the DOL found that CAMO had “willfully failed to post notice of the Labor Condition Application” and imposed civil penalties of $192,625 for the 67 individual violations that occurred between 2006 and 2009. The DOL also recommended that DHS disbar CAMO from the H-1B program for at least 2 years.

However, an administrative law judge found that CAMO did not willfully fail to satisfy the LCA notice requirements and rescinded the penalties. In the ALJ’s view, CAMO’s actions were inconsistent with “willful” violations: the employer had fully cooperated with a 2005 investigation; CAMO provided documents that were not fabricated to the DOL; (3) the DOL had no authority to investigate whether CAMO had posted at third-party sites, other than from CAMO’s own documentation; (4) the business director had readily turned over these documents; and her testimony was credible.

The ARB reversed the ALJ, finding that the violations were willful, and reinstated the penalties. The ARB’s finding rested fully on a “perfunctory conclusion” that the stipulation of facts before the ALJ—namely, CAMO’s “admissions” that it violated the posting requirements despite the DOL’s repeatedly notifying it over several years of its deficient posting—contradicted the ALJ’s determinations as to the employer’ state of mind and established as a matter of law that the company had willfully violated the posting requirements.

No willful failure. The district court reversed, concluding that the ARB’s finding of a willful failure was arbitrary and capricious. The weight of the evidence supported the ALJ’s finding that CAMO actually did believe that documenting its efforts to post LCA notices at worksites out of its control demonstrated compliance with the LCA notice requirements, the court said.

The relevant regulation defines “willful failure” as a knowing failure or a reckless disregard with respect to whether the conduct was contrary to H1-B visa statutes or regulations. Willfulness, under this definition, means “voluntary,” “deliberate,” or “intentional,” the court observed, and not merely negligent. The ARB’s basis for finding a willful violation bore no rational connection with this standard, the court concluded. “Knowledge of the LCA Notice Requirements themselves and knowledge that particular conduct is violative of the LCA Notice Requirements are not the same thing,” the court wrote. “The ARB correctly concluded that CAMO officials had been put on notice of the LCA Notice Requirements. However, the ARB ignored the weighty evidence that CAMO believed documenting its attempts to post at third-party worksites was an acceptable practice where the clients in control of those worksites refused to cooperate.”

Moreover, circumstantial evidence supported a finding that CAMO was indeed faced with such resistance. The business director, for example, credibly testified to the “widespread belief in the community of H-1B employers that merely documenting efforts to post at third-party worksites was sufficient.” The company did revise its posting procedures after the 2005 investigation in an apparent attempt to comply, the court noted further. Most critically, it added, it was “highly implausible that CAMO would have carefully documented its failures and shared those failures willingly with the DOL if it thought its conduct was impermissible.” That point resonated even further given that the DOL would have had no other way of uncovering the 67 individual violations for which the company ultimately was charged, observed the court. While the earlier investigations “probably” should have put the employer on notice that it could not send H-1B employees to clients who refused to post notices, “the regulations clearly do not permit DOL to impose liability on an employer where the employer actually believed its conduct was permissible.”