Recession, Layoffs and Foreign Workers in E-1, E-2, H-1B, L-1, O-1,and TN Status

Due to the Coronavirus, and worldwide economic standstill, we are already seeing the beginning of large numbers of layoffs. More than a million workers in the US could lose their jobs by the end of March 2020. See, for example,   Goldman Sachs and Morgan Stanley have declared that a global recession is underway, see What if you are a foreign worker who is laid off? What if you are an employer who must layoff foreign national employees?

The good news is that many foreign workers in temporary status will have slightly less than two months to find another job and file a new petition with USCIS. Employees in E-1, E-2, E-3, H-1B, H-1B1, L-1, O-1 and TN status who lose their jobs due to layoffs or reduction in force, have 60 days (slightly less than two months) to find another job and file a change of employer or change of status petition with USCIS. The 60 days only applies if the worker has a valid E, H, L, O or TN petition. If the petition expires before the 60 days, the worker only has the time up until the petition expiration date. An individual may benefit from the 60-day grace period more than once; however, this grace period only applies one time per authorized nonimmigrant validity period. See, 8 CFR §214.1(1)(2). The whole purpose of the federal regulation is to “enhance worker mobility and ease the burdens nonimmigrant workers face when employment ends, either voluntarily or as a result of being laid off or terminated”. See 81 Fed.Reg. 82466 (Nov. 18, 2016)

Example: Ravi is a software developer on H-1B working for an IT company. Ravi has been happy with his job, and the employer has been paying him the prevailing wage and providing benefits. Unfortunately, due to the recession, his employer goes out of business and Ravi loses his job. At the time he loses his job, he still has six months left on his approved H-1B petition. Thus, Ravi has 60 days from the date he loses his job to find another H-1B employer, and to file a new H-1B petition for a change of employer with USCIS before the end of the 60 days.

Additionally, these temporary workers also have a 10-day grace period past the date of the petition validity (but, double-check that the I-94 is expiring on the same date!). So, suppose, an L-1, O-1 or TN employee is almost at the date of the expiration of his or her petition, and the employer has advised them that they are not renewing or extending the employee’s status. The L-1, O-1 or TN employee has a ten-day grace period after the expiration of stay to either file a petition for a change of status or extension of stay, or else to depart the U.S. See 8 CFR §214.1(1)(3).

This is also an option for H-1B workers, although H-1B workers have the advantage of being able to start work for the new employer immediately upon the filing of a change of employer petition, pursuant to H–1B portability, 8 CFR § 214.2(h)(2)(i)(H).

From the employer’s point of view, whenever terminating an H-1B worker, the employer must put the termination in writing, and is then obligated to notify USCIS that the company has terminated the employment of the H-1B worker. While a written termination is not required under federal immigration regulations for the E-1, E-2, O-1, L-1, or TN, it is always good practice to put terminations in writing, so there is no dispute later on as to salaries, etc owed to terminated foreign workers. Employers who “bench” their H-1B workers in nonproductive status are liable for payment of wages during the total time that the H-1B worker was not working, if the termination was not in writing.

Additionally, H-1B employers affirm when they sign the H-1B petition, that they will pay for the return airfare for the employee should they be terminated, to return to their home country. This provision has not been enforced much though.

If the H-1B employer does not currently have enough work, but wants to retain the foreign worker, they may file an amended H-1B petition for a part-time position. That way, the employer will be able to retain the worker in H-1B status without paying them whatever the full-time prevailing wage or actual wage is. The H-1B employee will be able to maintain legal immigration status, work some hours each week and at least have some income rather than sitting idle with no income.

Regarding E-2 treaty investor businesses, the employer needs to think of laying off foreign workers first, and trying to keep US workers on the payroll. Remember, continued extensions of E-2 treaty investor status depend upon sticking to the five-year plan for increasing the hiring of US workers and providing them with full-time employment. Thus, the foreign investor and business owner in E-2 status should first terminate foreign employees before laying off any US workers. Should the E-2 investor lay off US workers, the investor/employer is at risk of not being able to extend the E-2, due to a determination that the investment is only “marginal”. See 8 CFR §214.2(e)(15).

L-1 employers and employees need to be concerned not only about layoffs here in the US, but also about layoffs abroad, and company closures abroad. USCIS and the US Consulates abroad will deny L-1As and L-1Bs, should the related company abroad go out of business, or appear due to layoffs and decreased revenues, to be about to close its doors. The foreign related company must continue doing business for the length of the L-1’s stay in the US. Doing business is “the regular, systematic, and continuous provision of goods and/or services”. See 8 CFR §214.2(l)(1)(ii)(G)

Example: Fiorella has her degree in Fashion Design. She first worked for several years for a fashion design company in Milan, and then the parent Italian company transferred her to their subsidiary in New York as an L-1B, specialized knowledge worker.

Due to the Coronavirus epidemic and resulting lockdown in Milan, the Milan-based company goes out of business. While the US company is still in business, Fiorella is not able to extend her L-1B status because the parent company abroad is no longer doing business. However, at the time she needs to renew or change her status, no H-1B visa numbers are available either. So the H-1B is not an option. Luckily for her, the company advises her that they will not be able to extend her L-1B a few months before the I-94 expiration date.

Fiorella then decides to start her own fashion company. In her spare time at home, she has been making her own sketches and patterns, sewing and going to Fabscrap to get fabric, buttons, sequins, etc. So she already has some samples ready, for which she can advertise on line and get orders. As a citizen of Italy, she is eligible for E-2 treaty investor status. Through a combination of her savings, and a gift from her family, she is able to come up with $80,000 to start her own business, which she does. She incorporates her business, gets a business bank account, rents commercial space and she is ready to go. Of course, she needs a business plan and a schedule for hiring US workers. She may be able to obtain an E-2 visa, as a treaty investor, to develop and direct her new business (of course, she needs to be careful not to engage in work prior to any change in status or getting a visa).

There are actually successful fashion design companies that started up during the last recession in 2008-2009. See, “What 5 Successful Designers Learned Launching During the Great Recession”,

For all companies sponsoring foreign workers, it is a concern if revenues drop and there are layoffs, as the petitioning employer always has to convince USCIS and the US Consulate abroad that there is a real job waiting for the foreign worker, that the petitioning employer will remain in business for the time of the petition, and will be able to pay the foreign worker appropriately.

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