6th Circuit Court of Appeals Upholds J-1 Waiver as a Business Expense
December 5, 2014
In Kutty v. United States Dep’t of Labor, a doctor, owner of a clinic, filed a complaint against the Department of Labor claiming that he should not be liable to pay for J-1 waiver. The Sixth Circuit Court of Appeals upheld the argument of Administrative Review Board (ARB, a branch of the Department of Labor) that J-1 waiver is by law a business expense, thus, should be paid by the employer. Any attempt to receive “reimbursement” from employees for H-1B visa application or J-1 waiver would make employers liable for back wages. The court held that costs, including attorneys’ fees, of obtaining H-1B visas were business expenses within the meaning of 20 C.F.R.§655.731(c)(9)(iii)(C). Therefore, the court disposed the case and opined that the petitioner clinic owner is liable for both back wages and potentially civil penalties.
In support of the disposition and holding, the Court also ruled that the evidence presented by Department of Labor did not abuse its discretion or act arbitrarily in ordering the clinic to pay back wages.
Lastly, the court found the circumstance sufficient to justify holding the clinic owner liable to pay back wages based on the following factors,
“. . . (1) whether there was a failure to collect paid in capital; (2) whether the corporation was grossly undercapitalized; (3) the nonissuance of stock certificates; (4) the sole ownership of stock by one individual; (5) the use of the same office or business location; (6) the employment of the same employees or attorneys; (7) the use of the corporation as an instrumentality or business conduit for an individual or another corporation; (8) the diversion of corporate assets by or to a stockholder or other entity to the detriment of creditors, or the manipulation of assets and liabilities in another; (9) the use of the corporation as a subterfuge in illegal transactions; (10) the formation and use of the corporation to transfer to it the existing liability of another person or entity; and (11) the failure to maintain arms length relationships among related entities.” Kutty v. United States Dep’t of Labor, 764 F.3d 540, 554.
Kutty hired seventeen physicians in Tennessee and maintained a web of corporate entities to hire nonimmigrant entities. Majority of the factors were met. The Circuit Court, thus, held that Kutty could be held liable to back wages as the sole proprietor.
A lesson for other immigrants is—please check whether your employer can legally require you to indirectly pay for H-1B status or J-1 waiver application. The court clearly said no to employer’s attempt to recover payments for procedures mandated to be paid by business owner. Consult a trustworthy immigrant lawyer, should you find issues of this kind to surface in your life.
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