Acceptable deduction from the rate of pay

Under the DOL rule, the employer may make "authorized deductions" from the wages paid to the H-1B alien without affecting the employer's compliance with the required wage rate requirement. In addition to deductions required by law ( e.g. withholding on taxes) and by union contracts, the employer may make deduction that are reasonable and customary in the occupation or area of employment, such as for health insurance premiums and retirement fund contributions, as long as these deductions are made against the wages of U.S. workers as well as H-1B workers.

The employer may also make other deduction to which the H-1B worker has agreed in writing and which are principally for the benefits of the employee, as long as such deduction are not a recoupment of the employer's business expenses. Housing and food allowances are examples of deductions that usually are principally for the benefits of the employee. As noted above, the value of certain "in-kind" benefits may also be lawfully deducted, but the DOL, will closely scrutinize these arrangements carefully to determine if they are truly for the benefit of the H-1B employee. The cost of tools and equipment, travel expenses to and from off-premises assignments, and living expenses when the employee is traveling on the employer's business are examples of impermissible deductions for the employer's business expenses.

On the other hand, the rules specifically permit deduction of the cost of transportation from and to the alien's home country at the beginning and end of the assignment, unless the employer is liable for the cost of return transportation because it has terminated the H-1B worker.

Remember that all benefits must be reported as earnings to the IRS on the employee's W-2 form; the value of benefits that are not reported cannot be lawfully deducted under the DOL rules even if they otherwise meet the criteria of an "authorized deduction."

Warning regarding attorney's fees for the H-1B Cases

The Department of Labor has taken the position that the legal fees with regard to filing the LCA and the H-1B petition are employer's business expenses because only the employer is entitled to file the petition. Therefore, if an H-1B alien pays these fees and is not reimbursed by the employer, the amount of fees will be considered an impermissible deduction for the employer's business expenses. Therefore the amount of the fees will be subtracted from the rate of pay for purposes of determining employer compliance with the required wage attestation.

For further information, send your query to Aparna Davé.