When does one need to determine whether they’re an H-1B dependent employer?
Such a determination occurs when the employer is doing 1 of 3 things:
- Submitting a Labor Condition Application (LCA) to the Department of Labor (DOL)
- Filing a petition (Form I-129) on behalf of a nonimmigrant worker, using the above-mentioned LCA
- Seeking an extension for an existing H-1B employee
There may be other scenarios in which the employer must determine their status. For instance, if, after having already determined their status for an LCA, they restructure their company, they will have to go through the process again for any new LCA’s.
What is an H-1B Dependent Employer?
An H-1B employer, according to DOL, is one which employs a certain ratio of H-1B nonimmigrant workers to full-time equivalent employees who are employed in the United States (including H-1B staff). As per U.S. regulations, there are three categories to help employers determine whether they’re dependent. See the table below for a breakdown of the applicable ratios:
| # of Full-Time Equivalent Employees | # of H-1B Employees |
| 25 or fewer | 7 |
| Anywhere from 26 to 50 | 12 |
| A minimum of 51 | At least 15% of total full-time employees |
Employers who do not fall into 1 of these 3 categories are considered non-dependent.
What is a “full-time equivalent employee” (FTE)?
FTEs, according to U.S. regulations, are defined as people employed by a given company — which means consultants and contractors are not to be counted. To be counted as full-time, employees must work a minimum of 40 hours, unless the employer can demonstrate that their full-time employees work less than that on a regular basis — though they cannot work less than 35 hours per week.
Can you count part-time employees at all? If so, how?
Employers can calculate part-time employees in 1 of 2 ways:
- The employer can tally the total hours worked by all part-time employees during the pay period, divide that number by 40, and round to the nearest whole number. If, for instance, there are 4 part-time employers who worked a total of 83 hours in the given pay period, the employer would count them as 2 FTEs (83 ÷ 40 = 2.075 rounded down to 2).
- Part-time employees (those working less than 35 hours) may also be counted as half an FTE, and the employer should, in this case, round up to the nearest whole number. If, for example, they have 5 part-time employees, they can count that as 3 FTEs (2.5 rounded up).
How do regulations define an employer for H-1B purposes?
DOL and U.S. Citizenship and Immigration Services (USCIS) defer to the Internal Revenue Code (IRC) to determine whether a company or group of companies is to be considered a “single employer.” This means a “controlled group of corporations” is to be counted as a single employer. Controlled groups include:
- Brother-Sister-Controlled Group: A collection of corporations owned by a maximum of 5 persons. They must own at least 80 percent of the group.
- Parent-Subsidiary-Controlled Groups: A chain of corporations in which the 80% (or more) of at least 1 subsidiary is owned by the parent company. It must also be the case that 80% (or more) of each subsidiary is owned by either another subsidiary or the parent company.
- Combined Group: When 3 or more corporations are linked, and each of them is a member of either a brother-sister-controlled group or a parent-subsidiary-controlled group.
If a company is included in one of the above 3, it may be considered a single employer for H-1B purposes. And if a trade or business is a sole proprietorship, estate, trust, corporation, or partnership, then it will also be designated as a single employer.
How does an employer go about determining their H-1B dependency status?
The employer can refer to the chart from the 2nd question in this article. If, for instance, they count a total of 400 FTEs (including H-1Bs) and 61 of those are H-1B employees, then they will be considered H-1B dependent. This is because they fall into the 3rd category— that is, they have a minimum of 51 FTEs and at least 15% are H-1B.
What records should an H-1B employer keep?
H-1B employers should be sure to maintain copies of petitions, LCAs, payroll records, identity information of all H-1B workers, benefits plans, prevailing wage rates, wage determination methods, documentation of posting notice at worksite, and any requests for extensions.
If the company is sold or acquired in any way, they must provide a statement from the successor, a list of relevant H-1B employees, a breakdown of the new wage system, any pertinent changes to dates and metrics listed on the previously filed LCA form, and the Employer Identification Number of the acquiring company.
Further documentation will depend on the particular circumstances:
- If, for instance, the employer’s H-1B status is “readily apparent” or “borderline”, that status must be included in the relevant LCA — provided they meet the minimum requirements of the snapshot test. The employer need not, in this case, keep other records.
- If the employer claims to be non-H-1B dependent, performs a “snapshot test”, and fails to meet the criteria, they must keep dated records of the snap-shot calculations.
- If there are major changes in the make-up of the labor force, such that the employer’s designation would change from H-1B dependent to non-H-1B dependent, the employer must make a new calculation and maintain dated copies.
- The employer must make new calculations if they restructure or alter their identity in any way.
- If the employer identifies as a “single employer” (as per the IRC), and they claim non-H-1B dependent status, they must undergo a snapshot test. If they don’t meet the requirements of this test, they will need to change their status to H-1B dependent. They must also keep records of each company included in the “single employer” entity, in addition to detailed records of the determinacy calculation.
What is an “exempt H-1B employee”?
An H-1B worker is deemed exempt if they satisfy 1 of 2 criteria:
- They make a minimum of $60,000 per year
- They have a Master’s Degree (or its equivalent) in a related field
Employers claiming to hire only exempt workers must provide a statement testifying to this fact and a list of all H-1B workers linked to the LCA. They should also keep all petitions and records of payment.
Employers hiring exempt workers can skip certain attestations on the LCA.
What attestations does the employer need to make in regards to non-exempt employees?
H-1B dependent employers submitting an LCA on behalf of non-exempt employees must attest to the following:
- The new H-1B recruit would not displace any similarly able U.S. workers. This must be shown to be the case within 90 days leading up to filing the actual H-1B petition (Form I-129) and 90 days after this date. If a worker is transferred to the site of another employer, the same attestation must be made. The H-1B petitioner may be held liable should the new employer displace U.S. workers.
- Documents have been maintained regarding any U.S. employees that have left and any related job offers.
- The employer has made a sincere effort to hire and recruit similarly capable U.S. workers. To that end, the employer should maintain records pertaining to the recruitment process.