Aleutian Capital Partners Llc v. Perez et alFIRST MOTION for Summary Judgment . DocumentS.D.N.Y.January 12, 2017IN THE UNITED STATES DISTRICT COURT FOR THE SOUTHERN DISTRICT OF NEW YORK ALEUTIAN CAPITAL PARTNERS, LLC ) 100 Wall Street, Suite 900, New York, NY 10005 ) ) Plaintiff ) ) v. ) Civil Action No. 16-cv-05149 ER THOMAS E. PEREZ, sued in his ) official capacity, Secretary, et. al. ) Defendants ) PLAINTIFF’S MOTION FOR SUMMARY JUDGMENT Plaintiff Aleutian Capital Partners, LLC (“Aleutian”), pursuant to Rule 56 of the Federal Rules of Civil Procedure, moves for summary judgment on its Complaint seeking judicial review of the Final Decision and Order (“ARB Order”) of the Administrative Review Board of the Department of Labor (“ARB”). This action involves certain determinations made by the Administrator of the Wage and Hour Division of the Department of Labor as to alleged violations of the H-1B provisions of the Immigration and Naturalization Act, 8 U.S.C. § 1101 et seq. The Administrator’s investigation into Aleutian was initiated four years ago by an aggrieved party complaint from one employee. The Administrator expanded the investigation to involve the complainant and one additional H- 1B employee. After an investigation, the Administrator determined that Aleutian owed back pay to the complainant and the other H-1B employee for various violations. An Administrative Law Judge affirmed the Administrator’s determination. Case 1:16-cv-05149-ER Document 34 Filed 01/12/17 Page 1 of 4 Aleutian asks the Court to review the ARB Order under the Administrative Procedures Act, 5 U.S.C. § 701 et seq. and set aside the decision of the ARB. Specifically, and as more fully briefed in Plaintiff’s Memorandum of Law in Support of Motion for Summary Judgment: 1. The Court should set aside the decision of the ARB awarding back pay to the original aggrieved complainant, Shakir Gangjee, because the Administrator’s investigation determined that Aleutian compensated Shakir Gangjee in excess of the amount required on the Labor Condition Application for the calendar year 2012. The Administrator further conceded that the non-discretionary bonus payments are “considered to be wages paid” for H-1B purposes. The Administrator’s concession settles that there was no underpayment in 2012, and therefore the Administrator was not entitled to summary decision as a matter of law 2. The Court should set aside the decision of the ARB awarding back pay to the non- complaining H-1B employee, as the Administrator was without jurisdiction to investigate into any benching allegations, and the ARB’s decision affirming the award to this employee was ultra vires, in excess of his statutory authority, and arbitrary, capricious and not in accordance with the law. Greater Missouri Medical Pro-Care Providers Inc. v. Thomas E. Perez, 812 F.3d 1132 (8th Cir. 2015). 3. The Court should set aside the decision of the ARB awarding back pay to the original aggrieved complainant, Shakir Gangjee, filed on January 13, 2013, for the period August 15, 2011 and January 13, 2012, as the Administrator may not conduct an investigation on a complaint unless the complaint was filed not later than twelve months after the date of the failure alleged in the complaint pursuant to 8 U.S.C.A. §1182(n)(2)(A). The award of back pay for this period by the Administrator is ultra vires, in excess of his statutory authority, and in disregard of Case 1:16-cv-05149-ER Document 34 Filed 01/12/17 Page 2 of 4 the procedure set forth in the Administrator’s regulations; the ARB’s conclusion otherwise was clear error. WHEREFORE, plaintiff Aleutian Capital Partners, Inc., respectfully requests the Court enter summary judgment in its favor on all counts in its Complaint, for costs, and for other such relief the Court deems proper. Respectfully submitted, s/Richard B. Solomon Richard B. Solomon RS5332 Law Office of Richard B. Solomon 427 Bedford Road, Suite 340 Pleasantville, NY 10570 ATTORNEY FOR PLAINTIFF Case 1:16-cv-05149-ER Document 34 Filed 01/12/17 Page 3 of 4 CERTIFICATE OF SERVICE I hereby certify that on this, the 12th day of January, 2017, the above and foregoing pleading was filed electronically via the court’s CM/ECF system, which sent notification of such filing to all counsel of record, including the following: Natasha Waglow Teleanu Assistant United States Attorney Southern District of New York 86 Chambers Street, 3rd Floor New York, New York 10007 Telephone: (212) 637-2528 Facsimile: (212) 637-2786 E-mail: natasha.teleanu@usdoj.gov ATTORNEY FOR DEFENDANTS s/Richard B. Solomon Attorney Case 1:16-cv-05149-ER Document 34 Filed 01/12/17 Page 4 of 4 IN THE UNITED STATES DISTRICT COURT FOR THE SOUTHERN DISTRICT OF NEW YORK ALEUTIAN CAPITAL PARTNERS, LLC ) 100 Wall Street, Suite 900, New York, NY 10005 ) ) Plaintiff ) ) v. ) Civil Action No. 16-cv-05149 ER ) THOMAS E. PEREZ, sued in his ) official capacity, Secretary, et. al. ) Defendants ) MEMORANDUM OF LAW IN SUPPORT OF MOTION FOR SUMMARY JUDGMENT Case 1:16-cv-05149-ER Document 34-1 Filed 01/12/17 Page 1 of 25 ii TABLE OF CONTENTS TABLE OF AUTHORITIES………………………………………………………………..……iii INTRODUCTION………………………………………………………………………………...1 UNCONTROVERTED MATERIAL FACTS……………………………………………………2 LEGAL STANDARD……………………………………………………………………………..4 ARGUMENT AND AUTHORITIES ......................................................................................... .6 I. The ARB erred in finding that the Administrator was entitled to summary decision against Aleutian Capital Partners claiming that there was no genuine issue of material fact (Count 1 of Complaint)……………………………………………………..6 II. The Administrator exceeded his authority under 8 U.S.C. §1182(n)(2)(G)(ii) and 20 C.F.R. § 655.807 with respect to his investigation of wages to Minh Horn (Count 2 of Complaint)……………………….………………………………………….14 III. The Administrator violated 8 U.S.C. §1182(n)(2)(A) by conducting an investigation earlier than twelve months after the date of the failure alleged by Gangjee (Count 3 of Complaint) ……………………………………………………17 CONCLUSION……………………………………………………………..……………………18 Case 1:16-cv-05149-ER Document 34-1 Filed 01/12/17 Page 2 of 25 iii TABLE OF AUTHORITIES FEDERAL CASES Barker v. Admin. Review Bd., 302 F. App'x 248 (5th Cir. 2008) ................................................................................................ 5 Califano v. Sanders, 430 U.S. 99, 97 S.Ct. 980, 51 L.Ed.2d 192 (1977)……………………………………………...5 Christopher v. SmithKline Beecham Corp., 132 S.Ct. 2156, 183 L.Ed. 2d 153 (2012) .....................................................................................17 Citizens to Preserve Overton Park v. Volpe, 401 U.S. 402, 413-15, 91 S.Ct. 814, 28 L.Ed.2d 136 (1971)………………………….…………5 City of Arlington, Tex. v. F.C.C., 133 S.Ct. 1863 (2013) ………………………………………………………………………….17 Greater Missouri Medical Pro-Care Providers Inc. v. Perez, 812 F.3d 1132 (8th Cir.2015)………………………………………………………………4,15,16 Motor Vehicle Mfrs. Ass'n v. State Farm Mut. Auto. Ins. Co., 463 U.S. 29, 103 S.Ct. 2856, 77 L.Ed.2d 443 (1983) .................................................................... 5 Sierra Club v. U.S. Army Corps of Engineers, CIV.A. 05-1724JAP, 2005 WL 2090028 (D.N.J. Aug. 29, 2005) ................................................. 5 United States v. Morton Salt Co., 338 U.S. 632, 70 S.Ct. 357 , 94 L.Ed. 401 (1950) ......................................................................... 5 Willy v. Admin. Review Bd., 423 F.3d 483 (5th Cir. 2005) ……………………………………………………………………..5 FEDERAL STATUTES 5 U.S.C. § 701 et. seq. …………………………………………………………………………….4 5 U.S.C. § 706(2) ……………………………………………………………………………… 4,5 8 U.S.C. § 1101 et. seq…………………………………………………………………………… 1 Case 1:16-cv-05149-ER Document 34-1 Filed 01/12/17 Page 3 of 25 iv 8 U.S.C. § 1182(n)(2)(A) ……………………………………………………………6,14,15,16,18 8 U.S.C. § 1182(n)(3)(B)(i)(I)…………………………………………………………………...13 8 U.S.C. § 1182(n)(2)(F)…………………………………………………………………………15 8 U.S.C. § 1182(n)(2)(G)………………………………………………………………………..15 8 U.S.C. § 1182(n)(2)(G)(i)……………………………………………………………………...15 8 U.S.C. § 1182(n)(2)(G)(ii) …………………………………………………………………….15 29 U.S.C. § 207(e)(3)(a)…………………………………………………………………………10 FEDERAL REGULATIONS 20 C.F.R. §655.731(c)(2)………………………………………….………………….6, 8, 9, 13,14 20 C.F.R. §655.731(c)(2)(i)…………………………………………………………………… 13 20 C.F.R. §655.731(c)(2)(v)…………………………………………………………………….. 9 20 C.F.R. §655.731(c)(4)…………………………………………………...8, 9, 10, 11, 12, 13, 14 20 C.F.R. §655.731(c)(5)………………………………………………………………………...13 20 C.F.R. §655.737(c)……………………………………………………………………….10, 12 29 CFR §778.211…………………………………………………………………………….10,12 29 CFR §778.211(b)……………………………………………………………………………..10 29 CFR §778.211(c)…………………………………………………………………………..…11 20 C.F.R. § 655.736……………………………………………………………………………...12 20 C.F.R. § 655.807…………………………………………………………………………….. 15 20 C.F.R. § 655.807(f)(1)………………………………………………………………………..15 20 C.F.R. § 655.807(h)(1)............................................................................................................. 15 Case 1:16-cv-05149-ER Document 34-1 Filed 01/12/17 Page 4 of 25 v OTHER AUTHORITIES Administrator v. Greater Missouri Pro-Care Providers, Inc. ARB No. 12-015 (January 29, 2014)………………………………………………………..…. 16 Administrator v. Wings Digital Corporation 2004-LCA-00030 (ALJ March 21, 2005)………………………………………………….……. 8 Labor Condition Applications & Requirements for Employers Using Nonimmigrants on H-1 Visas in Specialty Occupations & As Fashion Models; Labor Certification Process for Permanent Employment of Aliens in the United States, 65 FR 80110 (Dec. 20, 2000) ...................................................................................................... 13 Case 1:16-cv-05149-ER Document 34-1 Filed 01/12/17 Page 5 of 25 1 Aleutian Capital Partners, LLC (“Aleutian”) seeks judicial review of the Final Decision and Order (“ARB Decision and Order”) of the Administrative Review Board of the Department of Labor (“the ARB”), which upheld part of a determination issued by the Wage and Hour Division of the Department of Labor (“Administrator”). Aleutian asks that the Court set aside the ARB’s holdings that: (1) the Administrator was entitled to summary judgment as the undisputed facts supported the claim of an underpayment in 2012; (2) the Administrator has unlimited authority to investigate anything and everything he chooses once he receives an aggrieved party complaint; and (3) untimely allegations in an aggrieved party complaint still give the Administrator authority to investigate those allegations. INTRODUCTION On December 31, 2012, Shakir Gangjee’s employment was terminated by Aleutian. Angered by his termination, Gangjee submitted a complaint to the Administrator on January 14, 2013, alleging that he was not paid the required wage, and the Administrator began an investigation based solely on that issue. The Administrator then used Gangjee’s specific, and partially untimely, complaint to initiate a broader investigation involving one additional Aleutian employee. After an investigation, the Administrator determined that Aleutian owed back pay to Gangjee and the other H-1B employee for various violations of the Immigration and Nationality Act, 8 U.S.C. § 1101 et seq. (“INA”). An Administrative Law Judge (“ALJ”) affirmed the Administrator’s determinations on cross motions for summary decision. On review, a panel of the ARB upheld the ALJ’s determinations, stating that there was no issue as to material fact on the motion for summary decision, and finding that the Administrator’s actions were neither ultra vires nor time-barred. Case 1:16-cv-05149-ER Document 34-1 Filed 01/12/17 Page 6 of 25 2 One member of the panel dissented in part, reasoning that the undisputed facts failed to support the Administrator’s claim of an underpayment to Gangjee in 2012 and that Administrator was not entitled to summary decision. The course of events arising from Gangjee’s initial aggrieved party complaint has proceeded contrary to the law resulting in prejudice and denial of due process to Aleutian. UNCONTROVERTED MATERIAL FACTS 1. Aleutian is a private equity investment group established in 2003 to acquire, operate and grow middle market companies (AR036). 2. On December 31, 2012, Shakir Gangjee, a Financial Analyst at Aleutian under H- 1B status, was terminated from his employment. Aleutian withdrew its Labor Condition Application (“LCA”) in support of the H-1B petition and notified USCIS of its termination of Gangjee’s employment with the company (AR039). 3. After Aleutian terminated Gangjee, Gangjee filed Form WH-4, “Information on Employer Committing Alleged Violation(s)” with the Administrator on January 14, 2013 (AR 289). 4. The Administrator handled the complaint as an “aggrieved party complaint.” (Declaration of David An, AR146). On the case assignment sheet, the complaint was listed as follows: “Alleged Violation, 21. Failure to pay required wage rate” (AR249). This was the only violation at issue when the case was registered. 5. Gangjee submitted his aggrieved party complaint on January 14, 2013, over twelve months past the dates of some of the alleged violations (August 6, 2011 to January 13, 2012)(AR289). Case 1:16-cv-05149-ER Document 34-1 Filed 01/12/17 Page 7 of 25 3 6. When the Administrator notified Aleutian of his investigation, he did not inform Aleutian that the investigation arose from a specific complaint by an aggrieved party. The Administrator requested extensive records beyond the issue of underpayment of wages and beyond Gangjee, the aggrieved party who complained. 7. The Administrator issued a Determination that involved Gangjee and one other H- 1B employee and went beyond the specific and particular complaint, and beyond the twelve month jurisdictional limit for such a complaint. (AR 286-AR288). 8. Aleutian timely requested a hearing. (AR280). The parties submitted dispositive motions, and the ALJ granted the Administrator’s motion for summary decision. (AR5-AR11). In relevant part, the ALJ concluded that notwithstanding the undisputed fact that Gangjee was paid in excess of the required LCA wage by Aleutian within the twelve month period prior to his complaint, the payments were not made in equal monthly installments and the nondiscretionary bonuses paid to Gangjee and reported on Gangjee’s 2012 Form W-2 did not count towards the wage obligation. The ALJ also concluded the Administrator’s expansive investigation was in compliance with his authority, and that the twelve month bar did not limit any matters at issue. (AR10). 9. On July 23, 2014, Aleutian sought review of the ALJ’s determination by the ARB. (AR498-AR502, Petition for Review). 10. The ARB issued its Final Decision and Order (“ARB Decision and Order”) on June 1, 2016, (AR293-AR300) stating: a. The Administrator was entitled to summary decision against Aleutian Capital Partners, asserting that there was no genuine issue of material fact; Case 1:16-cv-05149-ER Document 34-1 Filed 01/12/17 Page 8 of 25 4 b. The Administrator did not act outside his statutory or regulatory authority in extending the initial investigation and rendering a determination on violations outside those asserted by Gangjee and uncovered in the expanded investigation, notwithstanding the 8th Circuit decision to the contrary in Greater Missouri Medical Pro-Care Providers Inc. v. Perez, 812 F.3d 1132 (8th Cir.2015) (AR297); c. The Administrator’s investigation into Gangjee’s untimely allegations was not time barred even though Gangjee’s complaint extended outside of the twelve month limit. 11. Ultimately, the ARB upheld the ALJ’s order finding Aleutian liable for back pay to Gangjee and one other H-1B employee. LEGAL STANDARD The Court’s review of an agency's final determination is governed by the Administrative Procedure Act, 5 U.S.C. § 701 et seq. Pursuant to §706(2), a reviewing court must hold unlawful and set aside agency actions, findings, and conclusions found to be: (A) arbitrary, capricious, an abuse of discretion, or otherwise not in accordance with law; (B) contrary to constitutional right, power, privilege, or immunity; (C) in excess of statutory jurisdiction, authority, or limitations, or short of statutory right; (D) without observance of procedure required by law; (E) unsupported by substantial evidence in a case subject to sections 556 and 557 of this title or otherwise reviewed on the record of an agency hearing provided by statute; or (F) unwarranted by the facts to the extent that the facts are subject to trial de novo by the reviewing court. Case 1:16-cv-05149-ER Document 34-1 Filed 01/12/17 Page 9 of 25 5 5 U.S.C. § 706(2). An agency’s action, findings, and conclusions are arbitrary and capricious if: “the agency has relied on factors which Congress has not intended it to consider, entirely failed to consider an important aspect of the problem, offered an explanation for its decision that runs counter to the evidence before the agency, or is so implausible that it could not be ascribed to a difference in view or the product of agency expertise.” Motor Vehicle Mfrs. Ass'n v. State Farm Mut. Auto. Ins. Co., 463 U.S. 29, 43, 103 S.Ct. 2856, 77 L.Ed.2d 443 (1983). The reviewing court’s “function is dispassionate and disinterested adjudication, unmixed with any concern as to the success of either prosecution or defense.” United States v. Morton Salt Co., 338 U.S. 632, 640-41, 70 S.Ct. 357, 363, 94 L.Ed. 401 (1950). Accordingly, a reviewing court may not substitute its judgment for that of the agency. Citizens to Preserve Overton Park v. Volpe, 401 U.S. 402, 413-15, 91 S.Ct. 814, 28 L.Ed.2d 136 (1971), overruled on other grounds, Califano v. Sanders, 430 U.S. 99, 97 S.Ct. 980, 51 L.Ed.2d 192 (1977). Rather, “the court's inquiry is limited to determining whether the agency considered the relevant factors and articulated a rational connection between the facts found and the choice made, and whether there has been a clear error of judgment.” Sierra Club v. U.S. Army Corps of Engineers, CIV.A. 05- 1724JAP, 2005 WL 2090028, at *8 (D.N.J. Aug. 29, 2005) (internal quotations and citations omitted). At core, this case revolves around the scope of authority granted to the Administrator by Congress and the Administrator’s regulations. Such questions of law do not require deference to the agency and this Court reviews them de novo. See Barker v. Admin. Review Bd., 302 F. App'x 248, 249 (5th Cir. 2008) (citing Willy v. Admin. Review Bd., 423 F.3d 483, 490 (5th Cir. 2005)). Case 1:16-cv-05149-ER Document 34-1 Filed 01/12/17 Page 10 of 25 6 ARGUMENT AND AUTHORITIES This matter commenced four years ago as an aggrieved party complaint under 8 U.S.C. §1182(n)(2)(A) concerning Shakir Gangjee’s complaint that Aleutian did not paid wages to him according to the LCA. This is the sole basis identified by the Administrator in accepting Gangjee’s complaint. The finding of undisputed facts by the ALJ confirms that Gangjee was paid in excess of the required wage for the twelve month period preceding his complaint. In addition, under applicable statutory and regulatory language, the Administrator’s authority was limited to what Gangjee complained about, and only to the extent that Gangjee’s complaint was timely. The ARB failed to apply these limitations, its award of back pay was not in accordance with the facts, statute, and regulations, and includes issues beyond the actual scope of the aggrieved party complaint. I. THE ARB ERRED IN FINDING THAT THE ADMINISTRATOR WAS ENTITLED TO SUMMARY DECISION (COUNT 1 of COMPLAINT) The ARB erred in upholding the ALJ’s order that “the Administrator is entitled to summary decision as a matter of law”. To support its conclusion, the ARB selectively chose specific undisputed facts, cited incomplete regulatory sections, and failed to acknowledge regulatory provisions and clauses that contradicted its holding. The Administrator conceded that in 2012, Gangjee was paid more than what was required under the LCA and regulations at 20 C.F.R. §655.731(c)(2). Once it was determined that Aleutian paid Gangjee was paid in excess of what was required under the LCA within the twelve month period of Gangjee’s complaint of January 14, 2013, the Administrator’s investigation should have concluded with a finding of no violation against Aleutian. As the dissent stated, “to Case 1:16-cv-05149-ER Document 34-1 Filed 01/12/17 Page 11 of 25 7 be entitled to summary decision on the liability and amount for the 2012 wage obligation, the Administrator must show there is no genuine dispute as to any material fact and [the Administrator] is entitled to a decision as a matter of law”, and noted that the majority omitted the Administrator’s concession that the amount earned by Gangjee in 2012 “exceeded the amount required by the LCA” and that “the Administrator’s factual concession settles that there was no underpayment in 2012 and ends the Administrator’s ability to secure summary decision on that point.” (Dissent at 6-7, AR 298-299) Gangjee’s complaint was filed on January 14, 2013, limiting the investigation to the twelve month period preceding his complaint. The Administrator conceded that Gangjee was paid in excess of the required salary for the calendar year 2012. Rather than acknowledging that Aleutian did not violate the terms of the LCA, the Administrator invented requirements that do not exist within the statute and regulations to reach the determination that Aleutian owed Gangjee back wages in 2012, setting forth the proposition that 1) each pay period under the LCA is viewed separately and that overpayment in one period cannot offset payments in other periods1; 2) the nondiscretionary bonuses paid to Gangjee are only deemed to be wages paid for the purpose of meeting the monthly pro rata payment requirement for the month in which it was distributed; and 3) Aleutian could only receive credit towards the annual salary paid to Gangjee at exactly the rate of one-twelfth of the annual salary per month. However, none of these requirements appear within the statute and regulations, and are refuted by the LCA regulations themselves. 1 The LCA (Form ETA-9035) promulgated by the Department of Labor provides an employer 5 pay period options for the wage rate: hourly, weekly, bi-weekly, monthly, and yearly. Instructions for ETA-9035 state “Enter whether the rate of pay is in terms of per year, month, two weeks, week or hour in the section indicating “Rate is Per.”” The Administrator’s assertion that a pay period under the LCA is viewed “separately” would mean that where the LCA indicates a yearly salary, the yearly salary is the “separate pay period.” Case 1:16-cv-05149-ER Document 34-1 Filed 01/12/17 Page 12 of 25 8 The Administrator conceded, and the ALJ found, that Gangjee was paid $57,509 in 2012, in excess of the required amount of $49,370.99 (AR007; AR215). Gangjee’s wages reported on Form W-2 met the requirement of “Cash Wages paid” under 20 C.F.R. §655.731(c)(2). The Administrator’s and ALJ’s claim that “it is well-established that each pay period is to be viewed separately when determining whether an H-1B worker was paid the required wage” has absolutely no basis in the statute, regulations, or ARB precedent decisions. The only case cited by the Administrator and ALJ to support this allegation was a non-precedential decision issued by a single administrative law judge in Administrator v. Wings Digital Corporation, 2004-LCA-00030 (ALJ March 21, 2005). As noted by the dissenting opinion dismissing the Administrator’s reliance on Wings Digital, “the Administrator asserts that “[e]ach pay period is viewed separately and overpayments in one period cannot offset payments in other period.” But the Administrator points to no regulation that states this principle. Instead…the Administrator relies on a statement by an administrative law judge who also fails to cite statutory, regulatory, or ARB precedent as support for this ruling.” (Dissent at 7, AR 299). Indeed, the Administrator is unable to cite any statutory, regulatory, or ARB precedent to support this ruling because none exists. The notion that each pay period is viewed separately is an ultra vires creation of the Administrator for the sole purpose of discrediting what was before his eyes – that Gangjee was not underpaid in 2012 and that Aleutian was not in violation of the wage conditions of the LCA. The ARB Decision and Order upholding the ALJ’s determination that the bonus payments to Gangjee do not count towards the required wage payment is incorrect as a matter of law. The ARB decision cites a portion of 20 C.F.R. §655.731(c)(4) which states that “wages will be due in prorated installments…paid no less often than monthly”, but does not cite the entire regulation, omitting the clause which follows: Case 1:16-cv-05149-ER Document 34-1 Filed 01/12/17 Page 13 of 25 9 “…except that, in the event that the employer intends to use some other form of nondiscretionary payment to supplement the employee's regular/pro-rata pay in order to meet the required wage obligation (e.g., a quarterly production bonus), the employer's documentation of wage payments (including such supplemental payments) must show the employer's commitment to make such payment and the method of determining the amount thereof, and must show unequivocally that the required wage obligation was met for prior pay periods and, upon payment and distribution of such other payments that are pending, will be met for each current or future pay period.” This omission by the ARB is telling. The regulations clearly permit and accept “nondiscretionary payments” to supplement the regular/pro-rata pay to meet the required wage obligation. Moreover, the regulation specifically provides the example of a “quarterly production bonus” as a nondiscretionary payment. This clause was ignored by the Administrator, by the ALJ, and by the ARB, and contradicts the assertion that an H-1B worker must be paid one-twelfth of the annual required rate on a monthly basis. Only the dissent has acknowledged what Aleutian had repeatedly pointed out to the Administrator, to the ALJ, and to the ARB, that “neither [20 C.F.R. §655.731(c)(2) and (c)(4)] says that the bonus credit applies only to the ‘monthly” wage obligation in the month of distribution. Instead, Section 655.731(c)(2)(v) provides that the bonus may be credited toward the “wage obligation” and Section 655.731(c)(4) expressly discusses the possibility of a bonus applying toward the wage obligation on a “quarterly” basis.” (Dissent at 7, AR 299). The Administrator, ALJ and the ARB decision deliberately ignore the regulation’s example of a “quarterly production bonus” as a nondiscretionary payment, for acknowledging the use this example would defeat the assertion that the regulation requires all bonus payments to be paid on a monthly basis. The Administrator’s allegation in the face of clear and unambiguous regulatory language is a violation of Aleutian’s due process rights, and invented solely for the purpose of finding a violation to support his investigation of Aleutian. The ARB concurs with the Administrator’s assertion that that term “nondiscretionary” means “non-contingent” or “non-conditional” (ARB Decision and Order at 5, FN 6, AR297). Case 1:16-cv-05149-ER Document 34-1 Filed 01/12/17 Page 14 of 25 10 However, the term “nondiscretionary” with respect to bonuses is defined by the Fair Labor Standards Act (“FLSA”) and implementing regulations. As the Wage and Hour Division administers both the FLSA and LCA programs, the Administrator’s assertion that the term “nondiscretionary” has a different meaning within 20 C.F.R. §655.731(c)(4) is incredulous. Additionally, the LCA regulations distinguish the term “contingent and conditional” from “nondiscretionary” when describing bonus payments to certain H-1B employees at 20 C.F.R. §655.737(c). The regulations use the term “nondiscretionary” in 20 C.F.R. §655.731(c)(4) as opposed to “contingent and conditional” payments used in 20 C.F.R. §655.737(c), establishing that the Department recognizes there is a difference in the definition of each term. A “nondiscretionary bonus” is defined in the FLSA at 29 U.S.C. § 207(e)(3)(a) (FSLA §7(e)(3)(a)), and in Department of Labor regulations at 29 C.F.R. §778.211. The FSLA defines the “regular rate” as including all remuneration for employment paid to, or on behalf of, the employee. FLSA excludes from the regular rate “sums paid in recognition of services performed during a given period if…both the fact that payment is to be made and the amount of the payment are determined at the sole discretion of the employer at or near the end of the period and not pursuant to any prior contract, agreement, or promise causing the employee to expect such payments regularly.” 29 C.F.R. §778.211(b) provides the distinction between discretionary and nondiscretionary bonuses: “In order for a bonus to qualify for exclusion as a discretionary bonus under section 7(e)(3)(a) the employer must retain discretion both as to the fact of payment and as to the amount until a time quite close to the end of the period for which the bonus is paid. The sum, if any, to be paid as a bonus is determined by the employer without prior promise or agreement. The employee has no contract right, express or implied, to any amount. If the employer promises in advance to pay a bonus, he has abandoned his discretion with regard to it.” 29 C.F.R. §778.211(c) further provides: Case 1:16-cv-05149-ER Document 34-1 Filed 01/12/17 Page 15 of 25 11 “Promised bonuses not excluded. The bonus, to be excluded under section 7(e)(3)(a), must not be paid “pursuant to any prior contract, agreement, or promise.” For example, any bonus which is promised to employees upon hiring or which is the result of collective bargaining would not be excluded from the regular rate under this provision of the Act. Bonuses which are announced to employees to induce them to work more steadily or more rapidly or more efficiently or to remain with the firm are regarded as part of the regular rate of pay. Attendance bonuses, individual or group production bonuses, bonuses for quality and accuracy of work, bonuses contingent upon the employee's continuing in employment until the time the payment is to be made and the like are in this category. They must be included in the regular rate of pay.” Gangjee was a salaried employee, and therefore his compensation falls under the provisions of 20 C.F.R. §655.731(c)(4). At the time of hire, Gangjee was promised a bonus of 3 percent of any revenues earned and received by Aleutian as part of his regular pay. The bonuses were automatically calculated at 3% of any revenues earned and received by Aleutian, and paid on the next normal salary payment date in accordance with Aleutian’s regular payroll practices. This fact is undisputed (ALJ’s Decision, AR009, Footnote 3). Gangjee also acknowledged that he was promised the bonus at the time of hire (Gangjee Affirmation, AR523), and confirmed in an e- mail correspondence with Aleutian on February 29, 2012 acknowledging that he received the promised bonus based upon the company’s revenue for the month of February 2012 (AR 119, AR120, AR524). As Aleutian promised Gangjee to pay the bonus at the time of hire, automatically calculated at 3% of revenues earned and received, Aleutian lost discretion as to both the fact of payment and the amount of payment. By statute and regulation, these bonus payments were nondiscretionary and were properly included towards satisfaction of the wage obligation in accordance with regulations at 20 C.F.R. §655.731(c)(4), and included in Gangjee’s regular rate of pay as required by 29 C.F.R.§778.211(c). The Administrator’s substitution of the terms “conditional” and “contingent” for the regulatory term “nondiscretionary” used in 20 C.F.R. §655.731(c)(4) is ultra vires. 29 C.F.R. §778.211 provides that a bonus paid pursuant to a prior contract, promise, or agreement is Case 1:16-cv-05149-ER Document 34-1 Filed 01/12/17 Page 16 of 25 12 nondiscretionary, including promised bonuses based on an employment policy that an employee is entitled to the bonus if the employee meets certain predetermined requirements or if it depends on the employer meeting predetermined goals – such as “individual or group production bonuses”. The Department’s own regulations acknowledge that such bonuses meet the definition of a nondiscretionary payment, and repeats the FLSA regulation’s example of a production bonus as the sole example of a nondiscretionary payment in the LCA regulations. In addition, LCA regulations at 20 C.F.R. §655.737(c) as related to “exempt” H-1B workers2 specifically permit the use of “cash bonuses and similar compensation” to be counted towards the required annual wage. The regulation states “Cash bonuses and similar compensation can be counted or credited toward the $60,000 for "exempt" status only if payment is assured (i.e., if the payment is contingent or conditional on some event such as the employer's annual profits, the employer must guarantee payment even if the contingency is not met).” Here, the regulation uses the term “contingent or conditional”, as opposed to 20 C.F.R. 655.731(c)(4) which uses the term “nondiscretionary”. The use of different terminology within the regulation refutes the Administrator’s interpretation – if the Department of Labor wished to exclude “contingent or conditional” bonuses from the wage obligation, they would have used that term in 20 C.F.R. 655.731(c)(4) rather than “nondiscretionary”. It also negates the Administrator’s and ALJ’s claim that bonuses based upon an employee’s profits are not counted towards the annual wage payment.3 In fact, the sole example provided in the regulation as a nondiscretionary payment is itself “contingent or conditional” on an employer’s or an employee’s production. 2 “Exempt” H-1B workers relate to “H-1B dependent employers” under 20 CFR § 655.736 who are subject to additional attestation requirements. They are exempt from these attestation requirements for H-1B workers who earn at least $60,000 or hold a Master’s degree. Aleutian is not an H-1B dependent employer, but Gangjee qualifies as an “exempt” employee. 3 As noted by the dissent, the Administrator conceded that such bonus payments do count towards the H-1B wage. Case 1:16-cv-05149-ER Document 34-1 Filed 01/12/17 Page 17 of 25 13 Aleutian’s payments to Gangjee met the requirements of 20 CFR §655.731(c)(4). The Administrator cannot substitute his own definition of the term “nondiscretionary” where there is a clear statutory and regulatory definition of the term. Not only do the Department of Labor regulations acknowledge that “bonus contingencies” qualify as LCA wages, but the Department has also acknowledged that it lacks the authority to exclude them from wages: “Since the ACWIA4 expressly permits inclusion of cash bonuses, the Department does not believe it has the discretion to exclude them from the required minimum compensation.” See 65 Fed. Reg. 80110, 80136; 8 U.S.C. §1182(n)(3)(B)(i)(I). The regulation specifically acknowledges bonuses as counting towards the annual wage, and does not mandate that they be paid monthly. The Administrator claims 20 C.F.R. §655.731(c)(2) supports his allegation that compensation must be paid in equal monthly installments. However, 20 C.F.R. §655.731(c)(2) does not provide the frequency within which LCA wages must be paid, but rather, only describes what payments are considered “cash wages paid”. 20 C.F.R. §655.731(c)(2)(i) states “The required wage must be paid to the employee, cash in hand, free and clear, when due”, but does not define the term “when due”. That term is found in 20 C.F.R. §655.731(c)(4) for salaried employees, and in 20 C.F.R. §655.731(c)(5) for hourly wage employees. For salaried employees, the regulation clearly provides that nondiscretionary payments, such as a quarterly production bonus, may supplement the employee's regular/pro-rata pay in order to meet the required wage obligation. The nondiscretionary bonus to Gangjee of 3% of the company’s revenues was due when Aleutian received revenue and was paid on the next normal salary date. Neither the Administrator nor the ALJ found that Gangjee was not paid the promised nondiscretionary bonus. 4 American Competitiveness and Workforce Improvement Act of 1998 Case 1:16-cv-05149-ER Document 34-1 Filed 01/12/17 Page 18 of 25 14 However, the Administrator’s assertion that “when due” meant “monthly” is not supported by the regulatory text. During calendar year 2012, Gangjee was paid in monthly installments, and also received nondiscretionary bonuses based upon a percentage of revenues received to supplement his regular pro rata pay in accordance with 20 C.F.R. §655.731(c)(4). The income was treated as earnings for income tax and FICA purposes, and reported on the W-2 issued to him in 2012. All his W-2 wages and compensation counted as wages for H-1B purposes per 20 C.F.R. §655.731(c)(2). The bonus payments to Mr. Gangjee were promised at the time of hire, and meet the definition of a non-discretionary bonus under the FLSA and Department of Labor Regulations. The ARB’s Decision and Order upholding the ALJ grant of summary decision to the Administrator is not supported by the undisputed facts or by the statute and regulation. The Administrator conceded that the amount earned by Gangjee in 2012 “exceeded the amount required by the LCA” there was no underpayment in 2012, and the ARB Decision and Order upholding the grant must be reversed. II. ADMINISTRATOR EXCEEDED HIS AUTHORITY UNDER 8 U.S.C. § 1182(n)(2)(G)(ii) and 20 C.F.R. § 655.807 WITH RESPECT TO HIS INVESTIGATION OF WAGES TO MINH HORN (COUNT 2 of COMPLAINT) The Immigration and Nationality Act establishes four authorized bases for conducting investigations to determine an employer’s compliance with the Act: investigations upon the filing of an “aggrieved party” complaint under 8 U.S.C. § 1182(n)(2)(A); “random investigations” on a case-by-case basis of employers found to have willfully violated specified conditions in the previous five years, pursuant to Section 1182(n)(2)(F); “reasonable cause” investigations upon the personal certification of the Secretary of Labor under Section 1182(n)(2)(G)(i); and investigations Case 1:16-cv-05149-ER Document 34-1 Filed 01/12/17 Page 19 of 25 15 based on “specific credible information” from a “reliable source” pursuant to Section 1182(n)(2)(G)(ii). Ms. Horn was not an aggrieved party in this action, nor was this action a random investigation or a reasonable cause investigation personally certified by the Secretary of Labor, or a “credible information-reliable source” investigation. The statutory authority for conducting a “credible information-reliable source” investigation, affording an employer prior notice and an opportunity to respond is mandatory. 20 C.F.R. § 655.807(f)(1) requires the Administrator to provide prior notice of Wage and Hour’s intent to investigate and afford the employer an opportunity to respond. Those regulations expressly require the Secretary’s personal certification of the existence of reasonable cause and the Secretary’s authorization to investigate prior to the exercise by the Wage and Hour Division of its authority to proceed with an investigation under §1182(n)(2)(G)(ii). 20 C.F.R. § 655.807(h)(1). Because the requisite notice and opportunity to respond was not afforded Respondent, and because the determination of reasonable cause and decision to proceed with the investigation were not made by the Secretary, the Administrator’s expanded investigation into possible violations pertaining to Ms. Horn exceeded the statutory authority for such investigations under 8 U.S.C. § 1182(n)(2)(G)(ii)-(viii) and 20 C.F.R. § 655.807. The Eighth Circuit Court of Appeals held that the U.S. Department of Labor exceeded its authority in launching a launch a broad probe into a company’s compliance with the temporary worker visa program based on the complaint of a single worker. Greater Missouri Medical Pro- Care Providers Inc. v. Perez, 812 F.3d 1132 (8th Cir. 2015). The Court held that 8 U.S.C. § 1182(n)(2)(A) does not grant the Secretary authority to conduct an open-ended investigation of an employer and its general compliance without regard to the actual allegations in the aggrieved- Case 1:16-cv-05149-ER Document 34-1 Filed 01/12/17 Page 20 of 25 16 party complaint, and further expressly ties the initial investigatory authority to the complaint and those specific allegations “respecting [an employer's alleged] failure to meet a condition specified in an [LCA] or [an employer's] misrepresentation of material facts in such an [LCA]” for which the Secretary finds “reasonable cause to believe” the employer committed the alleged violation. The Court stated that “based on that single allegation and despite her very narrow reasonable cause determination, [the investigator] ... launched a comprehensive review of GMM, its general H-1B compliance, and all of its H-1B employees”, and that the law “did not authorize such a sweeping investigation.” The Court noted that “[t]he secretary’s expansive understanding of his investigatory authority is inconsistent with the plain language” of the law. The ARB Decision states “This matter arises in New York and comes within the ambit of the United States Court of Appeals for the Second Circuit. Under these circumstances, we are not bound by and thus do not acquiesce in the Eighth Circuit’s ruling” and “we continue to adhere to the opinion expressed by this Board in the majority decision in Greater Missouri Med. Pro-Care Providers, Inc., ARB No. 12-015 (ARB Jan. 29, 2014).” We urge the Court to follow the Eighth Circuit decision. Since the implementation of the Statute, the Administrator has unlawfully expanded his authority to investigate employers based upon a single aggrieved party complaint, without respect to whether there is any basis in fact for the investigation. Indeed, the ALJ stated in her decision that even if she had not found Complainant Gangjee’s complaint to have been substantiated, the Administrator can still find that the complaint to have established “reasonable cause to investigate”, and that the Administrator can determine the boundaries of the investigation. The ALJ and the ARB have provided the Administrator with unfettered ability to expand his authority beyond that which was granted to him by Congress, in violation of the Case 1:16-cv-05149-ER Document 34-1 Filed 01/12/17 Page 21 of 25 17 specific statutory limitations. The Eighth Circuit found that the law “did not authorize such a sweeping investigation” and that “[t]he secretary’s expansive understanding of his investigatory authority is inconsistent with the plain language” of the law. The Administrator’s actions were without observance of procedure required by law, in excess of statutory authority, and ultra vires. See City of Arlington, Tex. v. F.C.C., 133 S.Ct. 1863, 1864-65 (2013) (“But for agencies charged with administering congressional statutes, both their power to act and how they are to act is authoritatively prescribed by Congress, so that when they act improperly, no less than when they act beyond their jurisdiction, what they do is ultra vires”). This Court need not defer to such an inconsistent and incongruous interpretation of the pertinent statutes and regulations. As the United States Supreme Court has noted: “Deference is undoubtedly inappropriate, for example, when the agency’s interpretation is plainly erroneous or inconsistent with the regulation. And deference is likewise unwarranted when there is reason to suspect that the agency’s interpretation does not reflect the agency’s fair and considered judgment on the matter in question. This might occur when the agency’s interpretation conflicts with a prior interpretation, or when it appears that the interpretation is nothing more than a convenient litigating position, or a post hoc rationalization advanced by an agency seeking to defend past agency action against attack.” Christopher v. SmithKline Beecham Corp., 132 S.Ct. 2156, 2167, 183 L.Ed. 2d 153 (2012) (internal quotes and citations omitted). The Administrator should not be permitted to avoid the effect of Congress’s statutory limits or the limitations in his own regulations. III. ADMINISTRATOR VIOLATED 8 U.S.C. §1182(n)(2)(A) BY CONDUCTING AN INVESTIGATION EARLIER THAN TWELVE MONTHS AFTER THE DATE OF THE FAILURE ALLEGED BY GANGJEE (COUNT 3 of COMPLAINT) Gangjee submitted his complaint to the Administrator on January 14, 2013. 8 U.S.C. §1182(n)(2)(A) states that “No investigation or hearing shall be conducted on a complaint concerning such a failure or misrepresentation unless the complaint was filed not later than 12 Case 1:16-cv-05149-ER Document 34-1 Filed 01/12/17 Page 22 of 25 18 months after the date of the failure or misrepresentation, respectively.” The Administrator violated this statutory mandate immediately upon advising Aleutian that the scope of the investigation extended back to January 15, 2011. After investigation, the Administrator conceded that Gangjee’s total wages for the year 2012 exceeded the amount required by the LCA. As there was no wage violation within the 12 months prior to the filing of Gangjee’s complaint on January 14, 2013, the Administrator’s lacked the authority to investigate and impose back wages for any alleged violations prior to January 14, 2012. The statutory language is clear. Neither the Administrator, the ALJ, nor the ARB has the authority to circumvent the plain language contained in the statute. CONCLUSION While Congress authorized the Administrator to investigate alleged H-1B violations, Congress set specific statutory limits on the authority it granted to the Administrator. The Administrator further set specific regulations he must follow when exercising his statutory authority. Yet the Administrator in this matter expressly violated the terms of the statute limiting his investigatory authority, engaged in ultra vires rulemaking to support a finding of an underpayment to conceal his violation of the statutory mandate, and to use one individual’s aggrieved party complaint into an investigation far beyond the issues raised in that individual’s aggrieved party complaint. The Administrator lacked Congressional authority from the start for his finding of underpayment of wages and the investigation conducted here, and the ARB’s failure to recognize this is error. As such, Aleutian respectfully requests that the Court reverse the ARB’s decision upholding the Administrator’s violations. Case 1:16-cv-05149-ER Document 34-1 Filed 01/12/17 Page 23 of 25 19 Respectfully submitted, s/Richard B. Solomon Richard B. Solomon RS5332 Law Office of Richard B. Solomon 427 Bedford Road, Suite 340 Pleasantville, NY 10570 Case 1:16-cv-05149-ER Document 34-1 Filed 01/12/17 Page 24 of 25 20 CERTIFICATE OF SERVICE I hereby certify that on this, the 12th day of January, 2017, the above and foregoing pleading was filed electronically via the court’s CM/ECF system, which sent notification of such filing to all counsel of record, including the following: Natasha Waglow Teleanu Assistant United States Attorney Southern District of New York 86 Chambers Street, 3rd Floor New York, New York 10007 Telephone: (212) 637-2528 Facsimile: (212) 637-2786 E-mail: natasha.teleanu@usdoj.gov ATTORNEY FOR DEFENDANTS s/Richard B. Solomon Attorney Case 1:16-cv-05149-ER Document 34-1 Filed 01/12/17 Page 25 of 25
