Employers confronting business interruptions and shut-downs in the wake of the first COVID-19 wave face challenging workforce decisions about whether they need to lay-off or terminate workers. Employers having a workforce partially comprised of temporary foreign workers (i.e., workers holding work visas such as H-1B, L-1, E-1/2, E-3, TN, O-1, etc.) confront additional layers of complexity as their decisions may impact the employee’s work status in the United States (U.S.), ability to collect unemployment insurance, and eligibility to benefit from new stimulus measures. While there is no “one size fits all” approach, below are a set of key considerations for employers to utilize in making these difficult human resources decisions in consultation with their legal advisors.
COVID-19 Stimulus Measures’ Impact On Unemployment Benefits
As a result of COVID-19, the Families First Coronavirus Response Act (FFCRA) and Coronavirus Aid, Relief, and Economic Security (CARES) Act provide relief to both employers and employees via direct stimulus payments and an enhancement of unemployment benefits. Not only has the federal government increased the amount of benefits to employees, but the states also are making certain exceptions.
While the eligibility criteria for unemployment benefits may be different for each state, the following requirements generally apply to all workers:
- Being “available” to work
- Unemployed through no fault of their own
- Earned enough wages or hours in a “base period” (typically a 12 or 18 month period) prior to filing a claim, where the employer is paying into the unemployment system.
Most unemployment benefits systems also have a “work search” requirement, where claimants must actively seek employment and report on their job search activities to the state; however, most states are suspending this requirement due to the current pandemic.[1]
Availability for Temporary Foreign Workers
“Availability” to work presents challenges for foreign workers as the loss of employment may also result in the workers’ inability to remain in the U.S. lawfully. Specifically, federal law only allows states to credit wages earned by foreign workers “lawfully present for purposes of performing services.” It follows that in order to receive unemployment benefits a foreign worker must maintain lawful status in the U.S. Most states require foreign workers to have valid work authorization at the time that they apply for benefits and throughout the period during which they are receiving benefits.[2] However, until recently, terminated foreign workers immediately lost their nonimmigrant status and were required to leave the country. As such, foreign workers were not eligible to file a claim for unemployment benefits because they were no longer “available” to work in the U.S.
In January 2017, though, a rule change by the U.S. Citizenship and Immigration Services (USCIS) stopped most foreign workers from falling immediately out of lawful status when terminated, and because of this change, it now minimizes the challenges presented by the availability requirement. The new rule established a 60-day grace period for nonimmigrant workers when their employment ends before the close of their authorized validity period (e.g. I-94 admission record). This change provided foreign workers with an opportunity to pursue new employment opportunities for an extension or change of their current nonimmigrant status while being considered in lawful status post termination of employment. For unemployment benefits purposes, these foreign workers are arguably now “available” to work during their grace period.
Termination Impact On Eligibility for Unemployment Benefits
Terminated temporary foreign workers now may be eligible to apply for unemployment benefits during their 60-day grace period. However, if the foreign worker has not secured an employer/sponsor who has timely filed a new petition on their behalf, the foreign worker will lose their status once the grace period has ended. Simply, the foreign worker will no longer be available to work in the U.S., unless an employer has timely filed an H-1B petition on their behalf during that 60-day grace period.
Issues arise from the employment of a foreign worker’s spouse. A foreign spouse’s employment status is dependent upon the principal foreign worker maintaining legal immigration status. Spouses of foreign workers who are maintaining status (e.g., H-4, L-2, E-1/2/3) with a valid Employment Authorization Document (EAD) may be eligible to apply for unemployment benefits so long as the principal foreign worker is still employed. However, if the principal foreign worker is terminated, the spouse is also granted a 60-day grace period and their EAD is still valid during this period. Thereafter, they will be out of status and likely deemed unavailable to work for unemployment benefit purposes. Other workers with a valid EAD (e.g., pending Adjustment of Status applicants, TPS recipients, DACA recipients, etc.), still have a valid EAD after termination, but may also be eligible for unemployment benefits subject to similar limitations. The specific scenario will control.
Students presents another layer of complexity. F-1 foreign students with Optional Practical Training (OPT) or Curricular Practical Training (CPT) work authorization may not be eligible for unemployment benefits because, by definition, those services are performed by F-1 students as an integral part of their academic program. Specifically, F-1 CPT work authorized students are granted academic credit for their work experience and often the sponsoring U.S. entity does not withhold taxes and benefits payments (i.e., their employers do not pay into the system). Relatedly, some states may not consider student “work” as “employment” for benefits purposes. For example, the State of Michigan provides an exception to the definition of employment for F-1 student visa holders that may make them ineligible for unemployment benefits.[3] For students who may collect unemployment benefits, such as F-1 OPT students, immigration rules provide that the students may not accrue more than 90 days of unemployment during their initial period of post-completion OPT. Similarly, students granted an additional 24 months of ‘STEM’ OPT may not accrue more than an aggregate of 150 days of unemployment, which includes any days of unemployment during the initial 12 months of Post-Completion OPT. If they do, USCIS will deem those students to be out of status and subject to removal from the U.S.
H-2A Temporary Agricultural Workers may not be eligible for unemployment benefits as federal law expressly excludes agricultural services from the definition of “employment.”[4] The H-2A program allows a foreign worker to enter the U.S. for temporary or seasonal agricultural work typically valid for a period of less than one year. Given the short duration, the U.S. does not authorize unemployment benefit protection. However, the FFCRA requires employers to provide employees paid sick leave or expanded family and medical leave due to certain COVID-19 related reason. Similarly, H-2B Temporary Non-Agricultural Workers, H-3 Trainees, and P (athletes, artists and entertainers) visa holders have only a 10-day grace period to remain in the U.S. following termination under existing regulations. As such, these nonimmigrants may not be eligible to receive unemployment benefits, as their “availability” is limited in duration.
Temporary Lay-Offs/Furloughs
Employers may confront a more challenging scenario when temporarily laying-off or furloughing a foreign worker. A lay-off is a result of an employer not having enough work for the employee to perform and involves a temporary separation from payroll, but often allows employees to maintain benefits coverage. Here the intention is for the employee to return to work. A furlough occurs when an employer requires its employees to work fewer hours or take a certain amount of unpaid time-off. A valid employer-employee relationship may continue to exist (i.e. continuity of benefits, active payroll, etc.) and it may be expected that the foreign worker, who is separated for lack of work will soon return to work. This is certainly true in the context of a “furlough” but arguably also true in the context of a temporary lay-off, where employees are expected to return to work when the state’s stay home order lifts. In the context of a foreign worker who is laid-off or furloughed, since there is not a permanent separation from work, it is not clear whether they will be eligible for unemployment benefits. These foreign workers will need to review the eligibility criteria in the state where they are working to determine if they are eligible to file a claim for full or partial unemployment benefits.
One problematic area for lay-offs and furloughs is in the highly skilled worker area. H-1B and E-3 workers must be paid at least the full salary offered in the I-129 petition and underlying Labor Condition Application (LCA). An H-1B or E-3 worker cannot be “benched” for lack of work. If wage continuity is not possible, an employer may explore options such as filing an amended H-1B petition to adjust for reductions in total pay and hours, while still paying the required wage rate, which is the higher of the actual or prevailing wage rate.
These wage level requirements do not exist for other foreign workers in L-1, E-1/2 or TN status, for example. As long as a valid employer-employee relationship continues to exist and the wages paid are otherwise in compliance with applicable federal and state laws, these workers will generally be considered to be maintaining their lawful status in the U.S. Please note that they must still consider how they can document compliance with their status in a subsequent consular visa application or extension/change of status application with USCIS. However, a key feature of state unemployment insurance programs is that the employer actually pays into the system. It is not uncommon for L-1 or E-1/2 workers to receive their full or partial salary from a related foreign entity abroad. As a result, this practice may impact a foreign worker’s eligibility to receive unemployment benefits, since the U.S. employer may not have contributed to the unemployment insurance and possibly U.S. tax withholdings have not been made. In addition, any earned wages paid after a worker is laid-off would need to be reported and could offset any benefits that a worker may otherwise be entitled to receive. CARES has loosened the requirements for paying into the system (e.g., self-employed and 1099 workers may receive benefits), but it did not directly address the foreign worker issue, and has left some discretion to the states in awarding such benefits.
Cross-Border Commuters
A foreign worker who regularly commutes and crosses the border from their home in Canada or Mexico to work for an employer in the U.S. may be eligible to file a claim for unemployment, if they are employed by and receiving their wages from, the U.S. employer and maintaining lawful status in the U.S. Again, it is unlikely that a cross-border commuter will qualify for unemployment benefits, if the commuter was not receiving wages from a U.S. employer. Similar to the example above, where an L-1 or E-1/2 foreign worker receives payment from a foreign employer abroad, the lack of payment into the unemployment benefit system in the U.S. may impact eligibility. A cross-border commuter with valid work authorization in the U.S. must review the eligibility criteria for unemployment in the state where they are working.
Border states such as Michigan expressly provide for these scenarios, albeit with often conflicting results. Michigan has established procedures for non-U.S. citizens to claim unemployment benefits. The employee may register using his/her Permanent Residence card or I-94 Arrival/Departure Record and the expiration date of their work authorization (if applicable) as opposed to the standard U.S. social security number. Michigan Employment Security Act administrative rules then address the payment of benefits to interstate claimants.[5] This rule specifically states this provision shall apply to accepting claims for unemployment pursuant to an agreement regarding unemployment insurance between the U.S. and Canada.[6] However, the rule leaves silent the question of how the foreign worker may otherwise be eligible. Consequently, the above-referenced considerations come into force.
Public Charge Rule
It is important to point out that foreign workers, who seek unemployment benefits will likely not be impacted by the new public charge rule that went into effect on February 24, 2020. The rule clearly states that unemployment benefits are not considered a public benefit, since they are earned by the employee and a result of an employer’s contributions to unemployment insurance. As such, obtaining unemployment benefits should not negatively impact a foreign worker applying for permanent residence or make them inadmissible. Of course, immigration policy and law is subject to ongoing change.
Ultimately, it is a personal decision to file a claim for unemployment benefits. Foreign workers should seek advice from their own personal lawyer.
About the Authors:
Suzanne Sukkar is a Member in the firm’s Ann Arbor office. She can be reached at 734.623.1694 or ssukkar@dickinsonwright.com.
Dan Ujczo is Of Counsel and Cross Border (Canada – U.S.) Practice Group Chair in the firm’s Columbus office. He can be reached at 614.744.2579 or dujczo@dickinsonwright.com.
Mark Heusel is a Member and China Practice Group Chair in the firm’s Ann Arbor office. He can be reached at 734.623.1908 or mheusel@dickinsonwright.com.
[1] Eligible individuals may qualify for an additional $600 a week of Federal Pandemic Unemployment Compensation (FPUC) set aside in the federal stimulus package included in the CARES Act under a program called Pandemic Unemployment Assistance that went into effect on March 29, 2020. As of now, the $600 weekly additional payments will expire at the end of July 2020. States must offer flexibility in meeting Pandemic Emergency Unemployment Compensation (PEUC) eligibility requirements related to “actively seeking work” if an applicant’s ability to do so is impacted by COVID-19.
[2] Section 421.27 of the Michigan Employment Security (MES) Act, Section 27(k)(1)(“Benefits are not payable on the basis of services performed by an alien unless the alien is an individual who was lawfully admitted for permanent residence at the time the services were performed, was lawfully present for the purpose of performing the services, or was permanently residing in the United States under color of law at the time the services were performed, including an alien who was lawfully present in the United States under section 212(d)(5) of the immigration and nationality act, 8 USC 1182”).
[3] Section 421.43 of the MES Act, Section 43(m). Service performed by an individual less than 22 years of age who is enrolled, at a nonprofit or public educational institution that normally maintains a regular faculty and curriculum and normally has a regularly organized body of students in attendance at the place where its educational activities are carried on, as a student in a full-time program, taken for credit at the institution, which program combines academic instruction with work experience, if the service is an integral part of the program and the institution has certified that fact to the employer. This subdivision does not apply to service performed in a program established for or on behalf of an employer or group of employers.
[4] Sections 214(c) and 101(a)(15)(H)(ii)(a) of the Immigration and Nationality Act, as amended.
[5] R 421.243 of the MES Act. Rule 243. (1) This rule shall govern the Michigan employment security commission in its administrative cooperation with other states and the Dominion of Canada for the payment of benefits to interstate claimants. “Interstate claimant” means an individual who claims benefits under the unemployment insurance law of 1 or more liable states through the facilities of an agent state. The term “interstate claimant” shall not include any individual who customarily commutes from a residence in an agent state to work in a liable state, unless the Michigan employment security commission finds that this exclusion would create undue hardship on such claimants in specified areas.
[6] The Executive Agreement – Series 244, permits Canada to participate in the Interstate Benefit Payment Plan only on a reciprocal basis. Since the states cannot enter into agreements with a foreign government under the provisions of the United States Constitution, it is necessary for any state which wishes to include Canada in its interstate claims operation to notify the Employment and Training Administration, which in turn will notify the Canadian Unemployment Insurance Commission and advise the state. All states are signatory to the Interstate Benefit Payment Plan, which specifically includes an extension to include claims taken in and for Canada.