Sixth Circuit: Not Legal for Employer to Withhold Wages to Pay for Immigration-Related Expenses

On August 20, 2014, the Sixth Circuit Court of Appeals affirmed decisions by the Department of Labor (DOL) Administrative Review Board (ARB) and the U.S. District Court from East Tennessee in Kutty v. United States Dep’t of Labor, finding employer Mohan Kutty liable for back wages and expenses related to violations of the Immigration and Nationality Act (INA). Kutty was ordered to pay $1,044,294 in damages to seventeen plaintiffs, all physicians who worked at his medical clinics in Tennessee and Florida, plus $108.800 in civil penalties.

The plaintiffs in the case are physicians who were employed by Kutty after entering the United States on J-2 nonimmigrant foreign-medical-graduate visas. These visas allow physicians to remain in the United States for their graduate and medical training, but then require them to return to their home country for two years before applying for H-1B or L-1 visas or Lawful Permanent Resident status. Alternatively, the physicians can be granted a waiver of the two-year home-return requirement if an interested state or federal agency requests a J-1 waiver on his or her behalf. To get this waiver, the physician must submit a waiver application to the U.S. Department of State and demonstrate that s/he has a contract to practice medicine for at least three years in an area designated by the Secretary of Health and Human Services as having a shortage of health-care professionals. Once they have the J-1 waiver, the physician becomes eligible to apply for an H-1B visa. In order to get the H-1B visa, the physician’s employer must sign a Labor Condition application (LCA) with the DOL, certifying that the physician will be paid the greater of (i) the actual wage level the employer paid to other individuals with similar experience for the type of employment at issue, or (ii) the prevailing wage leve for the occupational classification in the area of employment. In this case, Kutty filed LCAs certifying that he would pay each of the physicians $80,000 per year.

Kutty, acting as an executive of the corporate entities that employed the physicians, signed and filed similar LCA’s for all of the plaintiffs. When business encountered financial difficulties, based on statements by the administrator of his Tennessee operations and his own cursory investigation, Kutty accused the physicians of lying about how many hours they were working and began withholding their salaries until they saw more patients. They sent Kutty a letter demanding to be paid according to their contract and threatening to contact the DOL if he did not comply. They further warned Kutty that he was probited from retaliating against employees for reporting violations of the INA. He responded by withholding their pay of the eight physicians who had joined in the letter.

The physicians then filed a complaint with the DOL. The administrator of the Wage and Hour Division of the DOL determined that Kutty had violated numerous provisions of the INA, including 1) willfully failing to pay required wages to the physicians, 2) failing to make LCAs available for public examination, 3) failing to maintain payroll records, and 4) retaliating against the physicians for engaging in protected activity under the INA.

The most interesting finding of the Court, agreeing with the DOL and the District Court, was that it was illegal for Kutty to withhold pay from his physicians in order to pay costs associated with filing immigration paperwork on their behalf. These withholdings reduced the physicians’ pay below the contractually-specified amounts, and all agency and court decisions indicated that this is clearly illegal: “Under the INA, employer-sponsors of H-1B nonimmigrants must pay a fee to file an H-1B petition on behalf of a nonimmigrant, and may not be reimbursed by their employees for ‘part or all of the cost’ of that fee. See 8 U.S.C. § 1182(n)(2)(C)(vi)(II); 8 U.S.C. § 1184(c)(9).

The Appeals Court rejected each of the defendant’s arguments and deferred to the DOL’s authority to administer its regulations, and found Kutty individually liable for all damages and fines assessed.

If you believe your employer has violated your rights under the Immigration and Nationality Act, please contact The Harman Firm, LLP.