A recent decision from a federal court in Tennessee affirmed an administrative decision awarding more than $1 million in back pay to H-1B physician employees of several clinics owned by Mohan Kutty.  The decision is Kutty v. Department of Labor.

Kutty is a physician who operated clinics in Tennessee and Florida.  He hired several foreign physicians to work in his clinics.  Dr. Kutty sponsored the foreign doctors for H-1B visas.  As part of the H-1B process, the employer must complete and file a labor condition application with the U.S. Department of Labor (DOL).  The employer represents in the labor condition application that it will pay the H-1B alien the greater of the prevailing wage or the actual wage paid to workers with similar skills, education, and experience.  One of the purposes of the labor condition application is to prevent employers from using cheap foreign labor to undercut U.S. workers.  The DOL must certify the labor condition application before the employer can file the H-1B petition with the U.S. Citizenship and Immigration Services (USCIS).

Dr. Kutty’s medical clinics began experiencing financial problems, and he reduced the salaries of some of the H-1B doctors.  Eight of the foreign doctors hired an attorney, who wrote a letter to Dr. Kutty demanding the unpaid salary.  The lawyer also threatened that if Dr. Kutty failed to pay his clients the unpaid wages that they would contact the DOL for noncompliance with the representations made in the labor condition application.  The letter also advised Dr. Kutty that the Immigration and Nationality Act (INA) prohibited him from retaliating against the eight complaining doctors. With the exception of one partial payment, Dr. Kutty stopped paying the eight complaining physicians.  They filed a complaint with the DOL.  On the day the DOL arrived for an on site audit, Dr. Kutty terminated seven of the eight complaining physicians.

The case raises interesting points that any employer of H-1B aliens should keep in mind.  Employers cannot “bench” an H-1B employee.  In other words, the employer must pay the H-1B alien the required wage for any period of nonproductive activity, such as for lack of work or the employee’s lack of a license or permit.  (Exceptions exist for nonproductive time due to non-work related factors, such as the employee’s request for a leave of absence.)  Dr. Kutty violated these provisions by failing to pay the H-1B physicians their full required wage.  He then exacerbated his problems by stopping all payments to the eight employees.  Dr. Kutty also violated the whistleblowing provision of the INA, which protects the H-1B employee who reports a violation of the INA or who cooperates in a government investigation.  The court rejected any notion that the adverse employment actions were for a legitimate, non-retaliatory reason.

The Kutty case is an extreme example of what not to do.  It illustrates the wisdom of consulting immigration counsel when taking action that could impact an H-1B employee, whether demotion, promotion, termination, cut in pay, or corporate merger, sale or acquisition.