For every H-1B petition an employer files, there must be a valid labor condition application (LCA).  This form is used by the Department of Labor to ensure both that employers do not use foreign workers to depress wages, and that the foreign workers are not exploited by their employers.  The LCA system is not independently policed, and the Department of Labor will generally get involved in an investigation only if complaints are made.  In a recent case, the Labor Department investigated a physician in Tennessee for numerous LCA violations.  In one of the biggest such rulings ever, the physician, Mohan Kutty, was ordered to pay more than $1 million in back wages to 17 doctors, in addition to fines of more than $100,000.

Dr. Kutty had a successful practice in Florida.  Seeking to expand his business, in 1998, he began work in Tennessee by opening a clinic in a rural area.  According to his statements during the investigation, he expected the clinic to lose money for a few years, and planned to use his income from Florida to subsidize the Tennessee business.  Eventually he opened five clinics and signed employment contracts with 18 doctors.  Each contract was for three or five years, and was made contingent on the physician receiving a license to practice medicine in Tennessee.  Each contract called for an annual salary of $80,000.

All but one of the doctors had entered the US on J-1 visas, and had obtained waivers of the home residency requirement based on their promise to work for three years in a medically underserved area.  After obtaining the waiver, INS regulations require them to begin work, in H-1B status, within 90 days of receiving it.

After a couple of years, it became clear that the Tennessee clinics were losing money.  Dr. Kutty accused the physicians of trying to undermine his business, and began withholding their salaries.  Eight of the doctors retained an attorney, who demanded their full salaries.  At this point, Dr. Kutty stopped paying them altogether.  Even before then, he had been paying the doctors well less than the $80,000 specified in the contracts, and below the $115,000 rate specified in the LCAs filed with the Department of Labor.  The eight then filed a complaint with the Labor Department.

During the Labor Department’s investigation, investigators found that Dr. Kutty did not maintain the public access files required under law, nor were LCAs posted as required.  Back wages and penalties were calculated, and the matter was set for a hearing. 

At the hearing, Dr. Kutty argued that because there is a one-year statute of limitations on Labor Department investigations, back pay and penalties could not be assessed except for the one year period before the complaint was filed on February 28, 2001.  The officer hearing the case disagreed, finding that the statute of limitations referred to the time in which a complain must be filed, not the time in which back pay can be awarded.  The officer also rejected the argument that because the doctors were either not yet eligible to work or were not working full time as a reason to withhold salary.  This is clear from the American Competitiveness and Workforce Improvement Act, when the practice of “benching,” placing an H-1B employee on leave and not paying them, was specifically prohibited.  Under the law, unless the employee is not working because of “non-work-related factors” the employee must be paid as specified in the LCA.  Nor, the officer found, was low clinic income or failure by the doctors to abide by the terms of their contracts a legal basis for withholding wages. 

The officer also found that in a number of cases, Dr. Kutty had improperly retaliated against the doctors who filed complaints with the Labor Department by withholding salary and firing them.  There were also numerous violations of regulations requiring the employer to maintain public records, for which each violation received a $800 fine.  In addition, many violations were found to be willful.  In short, Dr. Kutty never intended to pay the doctors the wages stated on the LCAs.  For each of these violations, a fine of $4,000 was assessed.  In addition to the fines, Dr. Kutty was barred from petitioning for an H-1B visa for two years. 

http://www.ilw.com/lawyers/immigdaily/dol_news/2002,1022-kutty.pdf