By Cliff Ennico

“I run a small software development business.

Last summer we had an intern from China who was absolutely fantastic. She is studying engineering at a local university and plans to graduate this spring. We would love to make her an offer of permanent employment but she has asked us to sponsor her for an H-1B visa.

We would love to do this for her, but are unsure of the legal and tax consequences of doing so. Can you help us out with some basic information?”

The whole subject of foreign visas for international students is extremely complicated. There are numerous “work visas” available to students, both before and after they graduate, and the U.S. Department of Homeland Security (the agency that issues these visas) keeps changing the rules just about every year.

The bottom line here is that you should consult with an immigration lawyer – this area of the law is extremely specialized, and I doubt the lawyer who handles your business and corporate law matters will know what to do, although he or she should be able to refer you to someone locally who can help you.

Having said that, here are a few basics.

The H-1B visa (http://en.wikipedia.org/wiki/H-1B_visa) is a “non-immigrant” visa allowing U.S. employers to hire a foreign worker in a “specialty occupation” for a temporary period, if the worker has a bachelor’s degree or its equivalent. The “specialty occupations” are mostly STEM – science, technology, engineering and mathematics – related fields, but interestingly also include fashion models (the bachelor’s degree requirement for these is waived if the models are “of distinguished merit and ability” — you gotta love the Government).

The duration of stay is three years, extendable up to six years, but gives the foreign worker an opportunity and some time to participate in the annual “green card” lottery, marry a U.S. citizen, have a child in the U.S., and do other things that might qualify them for an “immigrant” visa.

Generally, the employer of an H1-B visa candidate “sponsors” the foreign worker by petitioning Homeland Security on his or her behalf, filling out the necessary application forms, and paying the filing fees – the process of obtaining an H1-B visa can take up to several months and may cost up to several thousand dollars depending on the foreign worker’s individual circumstances.

When making an offer of employment to an H1-B candidate, you would use the same “offer letter” form you would use with a U.S. citizen, with a few modifications. Your biggest concern: how to prevent the foreign worker from quitting and going elsewhere once he or she has obtained the H-1B visa you have laboriously worked to obtain?

There are a number of accepted ways to deal with that scenario, but the most common is to require the worker to pay you “liquidated damages” if he or she leaves voluntarily (or is terminated “for cause”) during a specified period of time after you have applied for the H1-B visa. The rules for H1-B visas allows you to impose such damages as long as they are reasonably related to the costs you incurred in obtaining the visa, and are not a “penalty” designed to hold the worker in a condition of involuntary servitude.

In a recent case, the U.S. Department of Labor upheld an offer letter clause providing for damages of $10,000 if the worker quit during the first six months of his employment, $7,000 during the next six months, $4,000 for the next six months, and $3,000 for the next six months, where these amounts were based on the following considerations:

  • Damage to the employer and its need to protect its overall investment and interest as a going concern, and investment of the company in securing the services of the employee;
  • Direct and indirect costs incurred in bringing the H-1B employees to the U.S. and the amount of profits expected to be derived from each worker ($1,000 per worker per month); and
  • The “market perspective” value of such employees to other employers who may seek to hire such workers away from the employer and pay the damages because of the market demand for such workers.

The “liquidated damages” clause should not apply if the foreign worker is terminated by the employer without cause, but may be invoked if the worker is terminated “for cause” as defined in the offer letter.

An employer should also consider provisions allowing for termination of the employment relationship if:

  • The employer’s application for the H1-B is denied;
  • The application is delayed for an unreasonable period of time; or
  • The federal government changes the rules for H1-B visas in such a way that it is no longer feasible for the employer to continue the sponsorship (this determination should be made in the employer’s “sole discretion”).

If the H-1B worker will have access to sensitive technology, he should also sign confidentiality, nonsolicitation, “assignment of intellectual property” and other restrictive agreements the same as any other employee.

Cliff Ennico (cennico@legalcareer.com) is a syndicated columnist, author and host of the PBS television series ‘Money Hunt’. This column is no substitute for legal, tax or financial advice, which can be furnished only by a qualified professional licensed in your state. To find out more about Cliff Ennico and other Creators Syndicate writers and cartoonists, visit our Web page at www.creators.com. COPYRIGHT 2016 CLIFFORD R. ENNICO. DISTRIBUTED BY CREATORS SYNDICATE, INC. Follow him at @cliffennico.