The guidance creates a new wage obligation for L-1B employees on overseas payroll.

On April 14, the Administrative Appeals Office (AAO) of US Citizenship and Immigration Services (USCIS) issued a memorandum establishing a policy guidance following its April 12, 2017 decision in Matter of I- Corp. This case involved a semiconductor manufacturing company in Oregon seeking to transfer a Malaysian worker to the United State for two years on an L-1B visa. The petition stated that the beneficiary employee would remain on the Malaysian company’s payroll, receiving a wage of 43,445 Malaysian ringgits (approximately $13,468 per year, or $6.47 per hour). This proffered annual salary was below the federal minimum wage of $7.25 per hour and the Oregon state minimum wage of $8.95 per hour. In its decision, the AAO confirmed that

1. USCIS cannot approve an L-1 visa petition that is based on an illegal or otherwise invalid employment agreement, and

2. to prevent a potential conflict with the Fair Labor Standards Act (FLSA), USCIS must ensure that a beneficiary employee will not be paid a wage that is less than the minimum required wage under state or federal law, whichever is higher, before approving an employment-based visa petition.

The decision observes that “[t]he right to a minimum wage under the FLSA cannot be waived by agreement between an employee and his or her employer, [and] contractual understanding or agreements which effectively circumvent or evade the protection of the FLSA are invalid and unenforceable.” Further, the decision appears to create an additional quasi-prevailing wage requirement by noting that the employee’s compensation should not be “significantly lower than [that of] the beneficiary’s peers or the particular industry.”

Although this memorandum only affects those L-1 petitions filed at the USCIS Service Center, it is possible that Department of State consular posts may follow the same policy. The AAO mentions that in this matter, the Department of State had twice refused to issue the beneficiary an L-1B visa, based in part on the low salary being offered by the petitioner.

How Does This Affect a US Employer of L-1 Transferees?

This decision will have a significant impact on employers that transfer their employees to the United States either through the Blanket L-1 program or through an L-1B petition filed through the USCIS Service Center. Although the L-1 category has never been subject to the statutory requirement that a beneficiary employee be paid the prevailing wage for his or her occupation, L-1 petitioners must now ensure that (i) the wage paid to the beneficiary meets the requirements of the FLSA, even if the beneficiary will remain on the foreign payroll, and (ii) the beneficiary is not paid a significantly lower wage than his or her peers. The beneficiary employee’s “total compensation” may be considered in making these determinations. This may include travel expenses, housing, car allowances, and per diem payments. It is likely that the USCIS will begin issuing Requests for Evidence (RFEs) on L-1 petitions in order to elicit this information.