DOL Publishes Final Rule on Substitutions and Other Labor Certification Issues
Posted by Jeff Z. Xie, Attorney on July 10, 2007 at 23:29:17
DOL Publishes Final Rule on Substitutions and Other Labor Certification Issues [Federal Register: May 17, 2007 (Volume 72, Number 95)]
[Rules and Regulations]
[Page 27903-27947]
From the Federal Register Online via GPO Access [wais.access.gpo.gov]
[DOCID:fr17my07-15] [[Page 27903]] --------------------------------------- Part II Department of Labor --------------------------------------- Employment and Training Administration --------------------------------------- 20 CFR Part 656 Labor Certification for the Permanent Employment of Aliens in the United States; Reducing the Incentives and Opportunities for Fraud and Abuse and Enhancing Program Integrity; Final Rule [[Page 27904]] --------------------------------------- DEPARTMENT OF LABOR Employment and Training Administration 20 CFR Part 656 RIN 1205-AB42 Labor Certification for the Permanent Employment of Aliens in the United States; Reducing the Incentives and Opportunities for Fraud and Abuse and Enhancing Program Integrity AGENCY: Employment and Training Administration, Department of Labor. ACTION: Final Rule. --------------------------------------- SUMMARY: The Department of Labor (DOL or Department) is amending its regulations to enhance program integrity and reduce the incentives and opportunities for fraud and abuse related to the permanent employment of aliens in the United States. This Final Rule includes several major provisions. It prohibits the substitution of alien beneficiaries on permanent labor certification applications and resulting certifications. The Final Rule provides a 180-day validity period for approved labor certifications; employers will have 180 calendar days within which to file an approved permanent labor certification in support of a Form I-140 Immigrant Petition for Alien Worker (Form I-140 hereafter) with the Department of Homeland Security (DHS). The rule prohibits the sale, barter or purchase of permanent labor certifications and applications. In addition, this rule requires employers to pay the costs of preparing, filing and obtaining certification. An employer's transfer to the alien beneficiary of the employer's costs incurred in the labor certification or application process is strictly prohibited. The rule makes clear an alien may pay his or her own legitimate costs in the permanent labor certification process, including attorneys' fees for representation of the alien. The rule also reinforces existing law pertaining to the submission of fraudulent or false information and clarifies current DOL procedures for responding to incidents of possible fraud. Finally, the rule establishes procedures for debarment from the permanent labor certification program. Consistent with the proposed rule, the provisions in this Final Rule apply to permanent labor certification applications and approved certifications filed under both the Program Electronic Review Management (PERM) program regulation effective March 28, 2005, and prior regulations implementing the permanent labor certification program. This rule also clarifies the Department's ``no modifications'' policy for applications filed on or after March 28, 2005, under the new, streamlined PERM process. DATES: This Final Rule is effective July 16, 2007. FOR FURTHER INFORMATION CONTACT: William L. Carlson, Administrator, Office of Foreign Labor Certification, Employment and Training Administration, U.S. Department of Labor, 200 Constitution Avenue, NW., Room C-4312, Washington, DC 20210. Telephone: (202) 693-3010 (this is not a toll-free number). Individuals with hearing or speech impairments may access the telephone number above via TTY by calling the toll-free Federal Information Relay Service at (800) 877-8339 (this is a toll-free number). SUPPLEMENTARY INFORMATION I. Background The purpose of this Final Rule is to impose clear limitations on the acquisition and use of permanent labor certification applications and permanent labor certifications in order to reduce incentives and opportunities for fraud and abuse in the permanent labor certification program. It also promulgates key measures to enhance the integrity of the permanent labor certification program. This Final Rule continues efforts the Department initiated several years ago to construct a deliberate, coordinated fraud reduction and prevention framework within the permanent labor certification program. The Department laid the groundwork for greater integrity and security during the planning and promulgation of the 2004 Final Rule to implement the re-engineered PERM system. While fraud prevention has always been a goal of the Department's labor certification programs, our continuing program experience and that of other Federal agencies has demonstrated the need to focus on the specific opportunities for fraud and abuse addressed in this rule. A. Statutory Standard and Current Department of Labor Regulations Under section 212(a)(5)(A) of the Immigration and Nationality Act (INA or Act) (8 U.S.C. 1182(a)(5)(A)), before the Department of Homeland Security (DHS) may approve petition requests and the Department of State (DOS) may issue visas and admit certain immigrant aliens to work permanently in the United States (U.S.), the Secretary of Labor (Secretary) must certify to the Secretary of Homeland Security and the Secretary of State that: (a) There are not sufficient U.S. workers who are able, willing, qualified, and available at the time of the application for a visa and admission into the United States and at the place where the alien is to perform the work; and (b) The employment of the alien will not adversely affect the wages and working conditions of similarly employed U.S. workers. If the Secretary of Labor, through the Employment and Training Administration (ETA), is satisfied in his or her review of a sponsoring employer's application for certification that these two requirements have been met, he or she so certifies by granting a permanent labor certification. If DOL cannot make both of the above findings, the application for permanent labor certification is denied. The Department of Labor's regulation at 20 CFR part 656 governs the labor certification process for the permanent employment of immigrant aliens and sets forth the responsibilities of employers who wish to employ immigrant aliens permanently in the United States. The INA does not specifically address substitution of aliens in the permanent labor certification process. Similarly, the Department of Labor's regulations are silent on the question of substitution. On May 6, 2002, the Department published a Notice of Proposed Rulemaking (NPRM) to streamline the permanent labor certification program. 67 FR 30466 (May 6, 2002). A Final Rule implementing the streamlined permanent labor certification program through revisions to 20 CFR part 656 was published on December 27, 2004, and took effect on March 28, 2005. 69 FR 77326 (Dec. 27, 2004). The prior 20 CFR part 656 (2004) governs processing of permanent labor certification applications filed prior to March 28, 2005, except where certain provisions of this Final Rule will impact such applications. Previously filed applications may be refiled under the new PERM rule. B. General Immigration Process Involving Permanent Labor Certifications To obtain permanent alien workers, U.S. employers generally must engage in a multi-step process that involves DOL and DHS and, in some instances, DOS. The INA classifies employment-based (EB) immigrant workers into categories, e.g., EB-2 and EB-3, based on the general job requirements and the perceived benefit to American society. [[Page 27905]] U.S. employers must demonstrate that the requested job requirements, and in some cases the alien, fit into one of these classifications. The first step in the process for the EB-2 and EB-3 classifications, further described below, generally begins with the U.S. employer filing a labor certification application with DOL in accordance with 20 CFR part 656. The U.S. employer must demonstrate to DOL, through a test of the labor market, that there are no U.S. workers able, willing, qualified, and available at the time of the application for a visa and admission to the United States and at the place where the alien is to perform the work. The employer must also demonstrate that the employment of the alien will not adversely affect the wages and working conditions of similarly employed U.S. workers. Following review of the permanent labor certification application, DOL will either certify or deny the application. The Immigrant Petition for Alien Worker (Form I-140) is a petition filed with the United States Citizenship and Immigration Services (USCIS), within DHS, by a U.S. employer for a prospective permanent alien employee. Most Form I-140 petitions filed under section 203(b)(2) and (3) of the Act, the EB-2 and EB-3 classifications, must be accompanied by an approved labor certification issued by DOL. DHS has established procedures for filing Form I-140 petitions under 8 CFR 204.5. DHS reviews the approved labor certification in conjunction with the Form I-140 petition and other supporting documents to evaluate whether the position being offered to the alien named in the petition is the same as the position specified on the labor certification and whether the employment qualifies for the immigrant classification requested by the employer. In addition, DHS evaluates the alien's education, training, and work experience to determine whether the particular alien meets the job requirements specified on the labor certification. The approved labor certification is also used to establish the priority date for which an immigrant visa will be made available to the alien, based on the date the labor certification application was originally filed. C. Current ETA Practices Involving Permanent Labor Certifications Although not mentioned in 20 CFR part 656, ETA has for years informally allowed employers to substitute an alien named on a pending or approved labor certification with another prospective alien employee. Labor certification substitution has occurred either while the permanent labor certification application is pending at DOL or--by DOL's delegation to DHS--while a Form I-140 petition, filed with an approved labor certification, is pending with DHS. Historically, this substitution practice was permitted as an accommodation to U.S. employers due to the length of time it took to obtain a permanent labor certification or receive approval of the Form I-140 petition. Currently, the regulations do not set any validity period on a permanent labor certification and, thus, permanent labor certifications are valid indefinitely. Also, DOL regulations do not address payments related to the permanent labor certification program or debarment authority. In this Final Rule, the Department addresses problems that have arisen related to substitution, lack of a validity period for certifications, and financial transactions related to the permanent labor certification program. D. Issues Arising From Current Practices For more than 15 years, the Department has expressed concern that various immigration practices, including substitution, were subject to a high degree of fraud and abuse. See, e.g., Interim Final Rule, 56 FR 54920 (October 23, 1991).\1\ This concern was heightened by a number of recent criminal prosecutions by the Department of Justice (DOJ) as well as recommendations from the Department of Justice and the Department of Labor's Office of Inspector General (OIG), and public comments concerning fraud received in response to the May 6, 2002, NPRM on PERM. See, e.g., 69 FR at 77328, 77329, 77363, and 77364 (Dec. 27, 2004). --------------------------------------- \1\ The 1991 Interim Final Rule included a provision prohibiting substitution. That provision was overturned by the U.S. Court of Appeals for the D.C. Circuit on Administrative Procedure Act procedural grounds. Kooritzky v. Reich, 17 F.3d 1509 (D.C. Cir. 1994). DOL addressed the court's concern through publication of the NPRM for notice and comment on February 13, 2006, consideration of comments received and development of this Final Rule. 71 FR 7656 (Feb. 13, 2006). It is of no small significance that the plaintiff in that suit, an attorney, was later convicted for the criminal sale of fraudulent labor certifications used for substitution. U.S. v. Kooritzky, No. 02-502-A (E.D. Va. 2003). --------------------------------------- The Department's review of recent prosecutions by DOJ, in particular, revealed that the ability to substitute alien beneficiaries has turned labor certifications into commodities which can be sold by unscrupulous employers, attorneys, or agents to those seeking a ``green card.'' Similarly, the ability to sell labor certifications has been greatly enhanced by their current open-ended validity, providing a lengthy period during which a certification may be marketed. In many of these applications, the job offer was fictitious. In others, the job in question existed but was never truly open to U.S. workers. Rather, the job was steered to a specific alien in return for a substantial fee or ``kickback.'' The Federal Government has prosecuted a number of cases resulting from employers, agents, or attorneys seeking to fraudulently profit from the substitution of aliens on approved labor certifications and applications. One attorney filed approximately 2,700 fraudulent applications with DOL for fees of up to $20,000 per application. Many of these applications were filed for the sole purpose of later being sold to aliens who would be substituted for named beneficiaries on the approved labor certifications. See U.S. v. Kooritzky, No. 02-502-A (E.D. Va. 2003). Additional prosecutions have also involved the sale of fraudulent applications or certifications. See, e.g., U.S. v. Ivanchukov, et al., No. 04-421 (E.D. Va. 2005); U.S. v. Mir, No. 8:03- CR-00156-AW-ALL (D. Md. 2003); U.S. v. Fredman, et al., No. WMN-05-198 (D. Md.); U.S. v. Lee, No. 03-947-M (E.D. Va.); U.S. v. Mederos, No. 04-314-A (E.D. Va.); U.S. v. Yum (E.D. Va. 2006); U.S. v. Mandalapa, No. 205-NJ-03117-PS (D. N.J. 2006); U.S. v. Heguman, No. CR 04-1635(A)- RSWL (C.D. Cal. 2007). Our program experience confirms that such fraudulent activity adds to the cost of foreign labor certification programs--for example, resources spent processing fraudulent applications, anticipating and combating unscrupulous conduct, and assisting debarments or prosecutions after the fact. The Final Rule implementing the streamlined permanent labor certification program also discussed DOL's and others' concerns about fraud in the program and the steps the Department would be taking to minimize the filing of fraudulent or non-meritorious applications. 69 FR at 77328, 77329, and 77363 (Dec. 27, 2004). As implemented, the basic labor certification process under the new PERM system incorporates fraud detection measures targeting areas that have historically shown vulnerability. These measures include system and manual checks in key areas, as well as the use of auditing triggers and techniques, both targeted and random, which can be adjusted as appropriate to maintain security and integrity in the process. Personal Identification Numbers (PINs) and passwords for registration into the automated filing system are assigned to accounts issued to [[Page 27906]] sponsoring employers, who may then create sub-accounts for attorneys or agents who represent the employer. The initial stages of registration and application include system checks to verify the employer-applicant is a bona fide business entity. Once DOL's initial review of a filed application shows it to be technically acceptable for processing, the application transfers to a substantive review queue, where it may be selected for audit either randomly or based on specific criteria that tie closely to program requirements. Staff at ETA's National Processing Centers, where PERM applications are processed, also confirm information directly with employers, for example, to ensure each employer is aware an application has been filed on its behalf and is, in fact, sponsoring the alien named on the application. While these measures are targeted based on our program experience, they focus largely on discrete activities (employer verification, sponsorship, etc.) or on program requirements as reflected in questions throughout the application, and do not address broader labor certification policies historically of concern to the Department. For example, in the Final Rule to implement the PERM program, the Department noted the practice of allowing the substitution of alien beneficiaries may provide an incentive for fraudulent applications to be filed. 69 FR at 77363 (Dec. 27, 2004). The Department also concluded in that Final Rule that the emerging ``black market'' for purchase and sale of approved labor certifications is not consistent with the purpose of the labor certification statute at section 212(a)(5)(A) of the INA. While DOL was not able to address many of these fraud issues in the PERM Final Rule because they arguably went beyond the scope of the proposals contained in the PERM NPRM, the Department clearly indicated it would be exploring regulatory solutions to address these issues. 69 FR at 77328, 77329, and 77363 (Dec. 27, 2004). Similarly, the Department determined that additional regulatory action was required to reinforce and clarify core program components, both to strengthen fraud prevention and enhance program integrity. For example, a prohibition on modifications to applications was an original assumption of the PERM program and having such a clear, enforceable prohibition is critical to its long-term efficiency and effectiveness. A prohibition against the transfer of labor certification costs from sponsoring employers to alien beneficiaries keeps legitimate business costs with the employer, minimizes improper financial involvement by aliens in the labor certification process, and strengthens the enforceability of the bona fide job opportunity requirement. Accordingly, on February 13, 2006, the Department published in the Federal Register a Notice of Proposed Rulemaking to amend its regulations governing the permanent labor certification process to curb fraud and abuse and strengthen program integrity. 71 FR 7656. As proposed, the rule prohibited substitution of aliens not originally named on applications for permanent labor certification; limited the period of validity of a permanent labor certification to 45 calendar days; prohibited certain financial transactions or activities related to permanent labor certifications; and took other steps to enhance program integrity and reduce or avert fraud. This Final Rule builds on the foundation laid in the 2004 Final Rule implementing the streamlined permanent program and follows through on the strong commitment reflected in the NPRM for this rulemaking, culminating a multi-year effort to enhance integrity and fraud prevention mechanisms in the permanent labor certification program. To assist compliance and enforcement under this rule, the Department is reviewing available resources to determine its ability to establish a new toll-free telephone number, or to develop other means, to receive reports of potential violations. Calls would be screened by DOL staff, who would refer calls or inquiries to appropriate agencies within or outside the Department. II. Overview of the Regulation In order to protect the integrity of the permanent labor certification program, reduce the incentives for fraud and abuse, and comply with the Department's statutory obligation to protect the wages and working conditions of U.S. workers, the Department proposed in the NPRM a number of regulatory changes. As stated in the NPRM, the revisions were proposed in part in response to concerns raised historically by stakeholder agencies and individual program users. They also responded to the numerous substantive comments received to the May 6, 2002 NPRM. At its essence, each change was motivated by our program experience and desire and responsibility under the authorizing statute to restore and maintain the integrity of the labor market test. The Department's regulations at 20 CFR part 656 establish the fact-finding process designed to develop information sufficient to support the Secretary of Labor's determination, required under the statute, of the availability of or adverse impact to U.S. workers. The labor market test forms the basis for notice to U.S. workers of the job vacancy, for the recruitment process through which U.S. workers have the opportunity to apply and be considered for each job, and for employer attestations related to key terms and conditions of employment. While we remain sensitive to concerns raised by employers and others over the impact of these changes, we nonetheless have concluded, after careful review of comments on each proposal, that the identification and deterrence of fraud and the broader integrity of the program require a strong, comprehensive approach to which these regulatory reforms are critical. Accordingly, in this Final Rule the Department amends part 656 to add fraud prevention and redressive measures in the key areas identified in the proposed rule, as follows. Substitution--Consistent with the proposed rule, this Final Rule adds a new Sec. 656.11 to prohibit the substitution of alien beneficiaries as of the effective date of the Final Rule. This prohibition will apply to all pending permanent labor certification applications and to approved permanent labor certifications, whether the application was filed under the provisions of 20 CFR part 656 in effect before March 28, 2005, or on or after March 28, 2005. Additionally, as proposed, the Final Rule revises Sec. 656.30(c) to provide that a certification resulting from an application filed under 20 CFR part 656 in effect before March 28, 2005, or on or after March 28, 2005, is only valid for the alien named on the original permanent labor certification application. These regulatory changes do not affect substitutions approved by the Department or DHS under either regulation prior to this Final Rule's effective date. They also do not affect substitution requests in progress as of this rule's effective date. Due to the considerable evidence of past and continuing fraud in the permanent labor certification process, DOL through this Final Rule, among other measures, is eliminating the practice of substitution. The Department will work with the Departments of Justice and Homeland Security to explore appropriate circumstances under which substitution could be reinstated. We anticipate that there may come a time when all affected agencies are satisfied that there are sufficient anti-fraud protections to alleviate the concerns motivating this rule. [[Page 27907]] Modifications to applications--This Final Rule finalizes with minor changes the provision in the proposed rule prohibiting modifications to permanent labor certification applications once such applications are filed with the Department. The Department has implemented technological changes in the PERM program to alert applicants to technical grounds for deniability, thus eliminating the need for many modifications. Section 656.11(b) clarifies that requests for modifications to an application, where the application was filed after this Final Rule's effective date, will not be accepted. To comport with this clarification while ensuring due process, the Final Rule revises Sec. 656.24(g) to more precisely define what evidence may be submitted with an employer's request for reconsideration. Validity period--Although the Department had originally proposed permanent labor certifications be filed with DHS within 45 calendar days, this Final Rule extends that period to 180 calendar days. Accordingly, all permanent labor certifications approved on or after the effective date of this Final Rule will expire 180 calendar days after certification, whether the original application was filed under 20 CFR part 656 in effect prior to or after March 28, 2005, unless filed prior to expiration in support of a Form I-140 petition with DHS. Likewise, all certifications approved prior to this Final Rule's effective date will expire 180 calendar days after the Final Rule's effective date unless filed in support of a Form I-140 petition with DHS prior to the expiration date. Ban on sale, barter, purchase, and certain payments--This Final Rule prohibits the sale, barter, and purchase of applications and approved labor certifications, as well as certain payments to employers in compensation or reimbursement for the employer's costs incurred to obtain labor certification. This ban will apply to all such transactions on or after the effective date of This Final Rule regardless of whether the labor certification application involved was filed under 20 CFR part 656 in effect before March 28, 2005, or on or after March 28, 2005. In consideration of comments, the Final Rule more precisely describes the payments being prohibited. Proposed Sec. 656.12(b), now Sec. 656.12(b) and (c), has been revised to reflect this approach and definitions have been added to Sec. 656.3. Debarment and program integrity--Finally, the Final Rule institutes several enforcement mechanisms as described in the proposed rule, with revisions to clarify procedures and address comments received in response to the NPRM. On or after the effective date of this Final Rule, the Department may debar an employer, attorney or agent based upon certain enumerated actions such as fraud, willful provision of false statements, or a pattern or practice of noncompliance with PERM requirements, regardless of whether the labor certification application involved was filed under the prior or current regulation. In addition, other provisions related to all applications filed under 20 CFR part 656 in effect before March 28, 2005, or on or after March 28, 2005, highlight existing law pertaining to submission of fraudulent or false information and clarify our procedures for responding to possible fraud. As proposed, this Final Rule extends from 90 to 180 days the period during which the Department may suspend processing of applications under criminal investigation. In addition, in response to comments requesting a materiality standard for the various debarment provisions, the Final Rule adds an intent requirement (``willful'') to the false information section; to be actionable, the employer must willfully provide false or inaccurate information to the Department. The Final Rule also raises the standard for debarment based on failure to comply with the terms of Forms ETA 9089 or 750, failure to comply with the permanent labor certification program's audit process, or failure to comply with the program's supervised recruitment requirements, to require there must be a pattern or practice of noncompliance in each case. These changes in the standard for debarment at Sec. 656.31(f) work in tandem with the revision to Sec. 656.26(a)(1). The new Sec. [acute]656.26(a)(1) expands the existing provision for a right to review the Department's denial of an application or revocation of a certification, to encompass a right to review of a debarment action. The request for review would be made to, and in appropriate cases a concomitant hearing would be held by, the Board of Alien Labor Certification Appeals (BALCA). III. Discussion of Comments on Proposed Rule The Department received a total of 489 comments from attorneys, educational institutions, trade associations, individuals, and businesses. Many of the comments were duplicative in nature and have been grouped together for discussion purposes. Although most of the commenters were critical of one or more of the proposed changes, they also supported the Department's efforts to deter fraud in the permanent labor certification program. Several commenters suggested alternatives for improving the fraud rule, while some suggested abandonment of the proposed rule entirely. A. Prohibition of Substitution or Change to the Identity of Alien Beneficiaries on Permanent Labor Certifications and Applications The proposed rule prohibited the substitution of alien beneficiaries on pending applications for permanent labor certification and on approved labor certifications. The comments we received on the prohibition of substitution raised concerns in a number of key areas: the Department's authority to make the rule change; the nexus between the proposed ban and the incidence and types of fraud that have occurred; the Department's premise that substitution is no longer needed, both because the new, automated system has significantly reduced processing time and because the backlog of permanent labor certification applications filed prior to March 28, 2005, will be eliminated by September 30, 2007; the application of the ban to all pending applications and approved certifications; and the hardships that employers would suffer and costs they would incur as a result of such a ban. We address the comments bearing on each of these issues below. However, after thoughtfully reviewing and deliberating over the concerns raised, we continue to find that the public benefit of eliminating substitution on permanent labor certifications and applications outweighs any potential disadvantages to individual program users. Consequently, as originally proposed in the NPRM, the Final Rule includes a new Sec. 656.11 providing that, as of the effective date of the Final Rule, substitution of alien beneficiaries will be prohibited: (1) On all pending permanent labor certification applications; and (2) on certifications, regardless of whether the application was filed under 20 CFR part 656 in effect before or on or after March 28, 2005. Likewise, once this Final Rule takes effect, the revised Sec. 656.30(c) makes a certification valid only for the alien named on the original application. As explained in the NPRM, this regulatory change has no retroactive effect on substitutions approved by the Department or DHS prior to this Final Rule's effective date. As made implicit by the new Sec. 656.11(a), this Final Rule also has no retroactive effect on substitution requests in progress (submitted) prior to this rule taking [[Page 27908]] effect. These and the other regulatory changes promulgated in this Final Rule modify the statement in the preamble to the December 27, 2004, PERM Final Rule that applications filed before that Final Rule's effective date would continue to be processed and governed by the then- current regulation. 69 FR 77326 (Dec. 27, 2004). 1. Statutory Authority Several commenters questioned the Department's authority under the INA to eliminate substitution of aliens on certifications and applications. Statutory authority relative to qualifications and identity of alien--Many commenters opposed the ban on substitution as being overbroad and overreaching. Commenters referred to the plain language of the authorizing statute and opposed the elimination of substitution on grounds that DOL's jurisdiction, based on 8 U.S.C. 1182(a)(5), stops with determining worker unavailability and adverse impact and does not extend to activities related to worker identity or qualifications. Commenters stated that the authority to scrutinize the qualifications of the alien named on the petition rests solely with USCIS. More specifically, commenters questioned the Department's authority to join the labor certification application to a specific alien, asserting labor certifications are related to the job opportunity, not the employee. They argued that the identity of the specific alien employee, whether the original beneficiary or a substituted beneficiary, is not relevant to a good faith labor market test. One commenter stated that the elimination of substitution, requiring a second labor market test for the position, contravenes what it believes is the legislative intent that the labor certification process require only a single labor market test. With respect to the statutory requirement that U.S. workers be unavailable, one commenter stated that the identity of the alien is not relevant to the labor market test, as long as he or she qualified for the job opportunity when the labor certification application was filed. With respect to the requirement of no adverse impact, the commenter stated that the alien's identity is also not relevant as long as the qualified alien is offered the appropriate wages and working conditions. The commenter raised concern that this rule would refocus labor certification from the job opportunity to the identity of the sponsored alien, and would do so without statutory change, evidence of fraud, or analysis of the increased costs to the employer. In fact, this commenter stated that given the automated, largely attestation- based nature of PERM, DOL is clearly unprepared and lacking in resources to evaluate evidence bearing on whether the alien is qualified for the job. The Department's authority to regulate and ban the substitution of aliens on labor certifications and applications is clear. The INA treats each alien individually and, for employment-based immigration requiring labor certification, makes every alien inadmissible, absent the Secretary of Labor's determination on U.S. worker availability and adverse impact. The trigger for such a determination has always been, at its core, the existence of a vacancy that an employer wishes to fill with an alien, and the burden of proof is always upon the petitioning employer to overcome the presumption of the inadmissibility of an individual intended immigrant employee through a test of the labor market. The statute itself could not be clearer that the labor certification process is alien specific. In defining the Department's role in the admission of an alien for employment-based permanent residence, INA section 212(a)(5)(i) ties the required certification to ``the place where the (emphasis added) alien is to perform such skilled or unskilled labor[,]'' and the necessity of certifying that ``the employment of such (emphasis added) alien will not adversely affect the wages * * *.'' The plain language of these provisions (i.e., the use of terms such as ``the alien'' and ``such alien'') is meant to focus not on the process but solely on its use to admit one, specific alien. It is this Department's responsibility to judge how and under what circumstances a labor market determination should be made, and what constitutes the employer's actual minimum requirements for performance of the job. It is appropriate and consistent with the broader statutory and programmatic intent to apply these requirements any time a position that is the subject of a labor certification application is or becomes vacant, regardless of whether the application covering it was previously in process and for how long. The labor market changes rapidly, and it is consistent with the Department's obligation to protect the jobs, wages and working conditions of U.S. workers to require that there be another labor market test when the job opportunity effectively changes through the unavailability of the original alien worker. The Department's regulations authorize it to closely review the information provided on the application with respect to the named alien. Our authority to examine the stated qualifications of the alien named on the application also extends to our determination of whether an employer has accurately stated the minimum qualifications necessary to perform the job, or has inflated or misstated job requirements. 56 FR 54920 (Oct. 23, 1991); see 20 CFR 656.17(i). Nevertheless, the Department does not undertake in this Final Rule to determine the visa eligibility of individual aliens. This rule governs the processing of labor certification applications, the validity of approved certifications, and other Department of Labor activities implementing relevant INA provisions and 20 CFR part 656; it does not speak to activities by the Departments of Homeland Security or State conducted under their respective authorities and jurisdiction. Further, the Department's focus is not on the identity of the individual alien but on the employer's failure to conduct a second labor market test for available U.S. workers when the original alien beneficiary becomes unavailable and, subsequently, when an employer seeks substitution. As stated in the NPRM, if the original alien beneficiary is no longer available, then the employer must use some means to fill that job opportunity. Clearly, the employer used some recruitment tool to find the new foreign worker for that newly opened job opportunity. Prohibiting substitution will ensure the employer again makes the reopened employment opportunity available to U.S. workers. In the event another alien is again the only qualified person available, then it is consistent with this program's purpose and the statute's plain language to require that the employer file a new application reflecting the new recruitment undertaken. The Medellin decision--A number of commenters cited the decision in Medellin v. Bustos, 854 F.2d 795 (5th Cir. 1988) in support of the argument that the Department lacks authority to prohibit substitution. The commenters argue that in Medellin, the Fifth Circuit held that the Department's administrative decision (based on operational guidance to program staff) to revoke a permanent labor certification based on the employer's substitution of another alien in place of the named alien more than six months after the certification was granted was not in accordance with applicable law. The commenters further argued that limiting a labor certification to ``the alien for [[Page 27909]] whom the certification was granted'' ran contrary to both the INA provisions (now at INA section 212(a)(5)) stating the Secretary of Labor's authority to determine worker availability and adverse impact, and the Department of Labor's own regulations, which provided that a labor certification was valid indefinitely, hence disconnecting validity and any time limitations. We carefully considered the Fifth Circuit's opinion in Medellin prior to the issuance of the NPRM and concluded that the dictum relied upon by commenters in the decision was not so compelling as to overcome the strong argument, based on the Department's authority and experience, that supports the elimination of substitution. We have reviewed that matter again as a result of comments and reach the same conclusion for a number of reasons. First, the ultimate basis for the Medellin decision was an administrative law issue not relevant to this rulemaking. Medellin involved a challenge to provisions in an ETA Technical Assistance Guide (TAG) that permitted the substitution of an alien on an approved labor certification only for the first six months after issuance. As the Medellin court correctly noted, the TAG was not published using notice and comment rulemaking procedures. Further, the six-month limitation was inconsistent with the then regulation at 20 CFR 656.30(a) that made labor certifications valid indefinitely. This rulemaking directly addresses the administrative law problem identified in Medellin by clarifying, after notice-and-public comment rulemaking, that a labor certification is valid only for the alien who was the beneficiary of the original application and only for a limited time, 180 days. The discussion in the Medellin decision about the relative responsibilities of DOL and INS in the labor certification process is dictum and clearly is not the legal grounds for the court's decision. Further, the reasoning in that dictum is not compelling and reflects an overly narrow view of the Department's role in the immigration process. Under the INA, the Department is responsible for requiring a labor market test that is the statutory prerequisite to the granting of a labor certification. Banning substitution enhances protections for U.S. workers by offering U.S. workers another chance when a job that was the subject of a labor certification once again becomes available through the departure of the alien employee. Section 212(a)(5) of the INA makes a foreign worker inadmissible unless, as one condition precedent, the Department determines there is no able, willing, and qualified domestic worker available to fill the position for which the foreign worker's admission is sought. Judicial interpretation of the word ``willing'' led to the creation of the process that has been in place since 1978, whereby the certification approval is predicated on an employer's demonstrated unsuccessful efforts to recruit a domestic worker. See Production Tool Corporation v. Employment and Training Administration, 688 F. 2d 1161 (7th Cir. 1982). The position that the job opportunity for which certification is being sought must be a job that a domestic worker can actually fill has been affirmed by two appellate courts subsequent to the Medellin decision. Bulk Farms v. Martin, 963 F. 2d 1286 (9th Cir. 1992); Hall v. McLaughlin, 864 F. 2d 868 (D.C. Cir. 1989). Given these considerations, it is perfectly reasonable for the Department to require the employer to conduct a new test of the labor market, and file a new labor certification application, every time the job opportunity becomes vacant. The Medellin litigation simply did not take place in a context that allowed the Department's concerns regarding the new test of the labor market to be adequately addressed. Relationship to DHS regulations--One commenter supported the ban on substitution but expressed concern that the impact of the change may be quite limited until DHS adopts corresponding regulations to prohibit the substitution of aliens. Another commenter argued that the public should not be placed in the position of dealing with competing and possibly inconsistent regulations issued by different agencies and suggested that DOL should withdraw its proposal until DHS signals its equivalent concern. DOL disagrees that there is a likelihood of competing or inconsistent regulations between DOL and DHS. No DHS regulations address or authorize substitution of alien beneficiaries on labor certifications. Rather, at present, DHS permits substitution on permanent labor certifications through a delegation of authority from DOL. See March 7, 1996 Memorandum of Understanding between the Immigration and Naturalization Service (INS) and Employment and Training Administration (signed by Louis D. Crocetti, Jr., Associate Commissioner, Examinations, and Raymond Uhalde, Deputy Assistant Secretary for Employment and Training). INS (the portion of that agency that provided immigration benefits) later became U.S. Citizenship and Immigration Services (USCIS) at the Department of Homeland Security. Pursuant to that 1996 MOU, when substitution is requested, DHS requires employers to submit a new (employer-completed but not processed) DOL permanent labor certification application form with the name of the substituted alien, along with the approved labor certification in the name of the original alien beneficiary. See USCIS Adjudicator's Field Manual, Sec. 22.2(b)(6) (Sept. 12, 2006). This Final Rule alters the current practice by providing that labor certifications, once approved, are valid only for the alien named in the original application and that substitution of alien names on the certification is prohibited. DOL and DHS have agreed that DOL will rescind the delegation of authority contained in the 1996 MOU consistent with the terms of this Final Rule and effective on the same date as this Final Rule. Because substitution of aliens on labor certifications has occurred pursuant to DOL authority, regulatory action by DHS is not necessary to implement a termination of its delegated authority with respect to DOL permanent labor certifications. Thus, following the effective date of this rule, employers will face a consistent approach to labor certifications: Substitution of the alien beneficiary on a permanent labor certification application or on the resulting certification is prohibited. As reflected throughout this Final Rule, the Department has determined that this prohibition on substitution is consistent with its statutory responsibilities and is necessary to achieve important objectives. DOL is responsible for administering the labor certification process and is authorized and accountable for improvements to the program, independent of employment- based immigration programs overseen by other Federal agencies. Therefore, although we have closely coordinated with DHS, DOL OIG, DOJ, and other appropriate agencies in this rulemaking and other fraud prevention efforts, DOL has determined, in light of the evidence of fraud and the continued concerns about fraud and program integrity raised by many sources, and the Department's statutory responsibility to U.S. workers, that it is appropriate to issue this regulation governing the part of the employment-based immigration process for which we are responsible. The Department has authority to administer, enforce, and reform programs under its jurisdiction, including to regulate the meaning and nature of a permanent labor certification issued under 20 CFR part 656. Nothing in this Final Rule in [[Page 27910]] any fashion interferes with DHS' authority or its ability to address fraud issues through a rulemaking process of its own. Entitlement to substitution--Many commenters asserted that since the practice of substitution has been permitted by DOL for several decades, the statute and regulations provide entitlement to substitution. One commenter asserted that the Department, under its current regulations at 20 CFR 656.30(c)(2), effectively provides that the labor certification application can be valid for any qualified worker, which the commenter interpreted to include a substituted worker. 20 CFR 656.30(c)(2). Another commenter opined that the absence of statutory entitlement to substitution is irrelevant to the clear value of substitution, which in its view far outweighs the perceived or potential benefits from reducing incentives for fraud. The Department disagrees with these comments. While substitution has been a long-standing practice at the Department and by delegation to DHS, the statutory framework to allow the permanent admission of foreign nationals to perform work was deliberately protective of U.S. workers and contains nothing approaching an entitlement to substitution. It is consistent with the statute's presumption of alien inadmissibility that admissibility must be demonstrated by each employer for each alien and that the statute does not provide for substitution of individual aliens on labor certifications or applications. This regulatory action is also consistent with the Congressional intent to grant the Secretary of Labor broad discretion in implementation of the permanent labor certification program. Nor is it surprising that the practice of substitution has not been authorized or addressed in DOL's regulations. Substitution has been permitted simply as a procedural accommodation to employer-applicants. The Department recognizes that this accommodation has had a distinct benefit to employers and applicants in allowing them to retain an earlier priority date and apply the results of a completed labor market test. However, as discussed later in this Preamble, the equities do not support retention of the earlier priority date. Accordingly, in light of the evidence that substitution is an important contributor to fraud in the labor certification program and of DOL's statutory interest in protecting U.S. workers by reestablishing worker unavailability whenever a position once again becomes vacant, the demonstrated ``black market'' in labor certifications, and the significant number of prosecutions for fraudulent activity related to the program, we conclude the benefits to elimination outweigh the potential disadvantages. As stated previously, the Department will continue to work with other Federal agencies with an interest in the employment- based immigration system to explore, under appropriate circumstances, potential alternatives to the current practice. 2. Evidence of Fraud Several commenters mentioned that the Department has not provided evidence of or statistics on widespread labor certification fraud or abuse and needs to consider the benefits of substitution against relatively few abuses. One commenter opined that elimination is appropriate only when a policy is commonly or largely misused. It stated the burden is on the Department to show the connection between fraud and substitution, and to establish that its elimination will not impede legitimate business practices. Some commenters questioned the effectiveness of eliminating substitution; they were concerned the rule does not target the most common sources of abuse or deter persons with intent to defraud. One commenter suggested that persons intending to engage in these abuses will find the substitution prohibition does not provide a significant obstacle to their endeavors. It stated such persons will remain free to file fraudulent applications naming the intended beneficiary and that substitution elimination will only succeed in moving the initiation of the fraudulent transaction with the foreign national back to a point in time before the filing of the application. The commenter asserted it is highly questionable whether such a minor achievement justifies the harm done to legitimate employers by the prohibition of substitution. Some commenters claimed the substitution prohibition will do little to eliminate the filing of applications without the knowledge of the employer, and the filing of applications by employers who are paid to engage in a fraudulent scheme and who have no intention of filling the job opportunity described in the application. Citing U.S. v. Kooritzky, No. 02-502-A (E.D. Va. 2003), they observed those who are determined to commit fraud will find a way to commit fraud. The NPRM detailed the reasons for our proposal to eliminate the practice of substitution. Our experience with the failures of this practice is longstanding and shared by other Federal agencies. The Department disagrees that eliminating substitution contributes only a ``minor'' achievement to addressing the realm of abuses over which the Department has control. The fraud cases prosecuted even within the recent past indicate a significant number of instances where substitution played a role in fraudulent activity in obtaining an immigrant benefit. See, e.g., U.S. v. Yum (E.D. Va. 2006); U.S. v. Mandalapa, No. 205-NJ-03117-PS (D.N.J. 2006). The Department continues to believe, based on the activity in these and other cases, that fraudulent substitution is a core contributor to the marketability of labor certifications because it is only if one can substitute that one can benefit from a certified application naming another individual. This marketability results in the use of labor certifications for fraudulent purposes--by aliens and employers with no intent to have a legitimate employment relationship. We agree there are numerous sources of fraud in employment-based immigration programs government-wide, and individuals intent on committing fraud and abusing the system may still find a way to do so. However, the existence of other types of fraud, separate from that generated by the practice of substitution, does not obviate the need to address the documented fraud related to alien substitution. As described earlier, the Department has instituted specific checks and balances in the PERM process to address and prevent the filing of applications without the employer's knowledge. For example, the National Processing Centers contact the employer directly to confirm it is aware of the application and is sponsoring the alien, and the ETA Form 9089 requires distinct contact information for the employer and the attorney or agent filing the application. The substitution prohibition enhances and supplements existing anti-fraud and program integrity measures. Alternatives to a regulatory ban on substitution, including limiting or tailoring the option to substitute--One commenter asserted the elimination of substitution in no way facilitates the identification of fraudulent labor certification applications, and this rule instead takes a ``shotgun'' approach at the expense of legitimate program users. The comment stated the goal of reduced fraud is better achieved by heightened enforcement measures, which it states the Department has already put in place in the PERM program. The commenter also pointed to traditional law enforcement measures, like the [[Page 27911]] discernment of patterns in groups of applications filed by a given employer or attorney, to ferret out fraud and abuse. One commenter argued existing regulations provide a sufficient basis to prosecute employers, employees, and attorneys alike who engage in fraudulent activity associated with the permanent labor certification process. Others also suggested there is no need to ban substitution because of the additional provisions prohibiting the sale, barter, or purchase of labor certifications at Sec. 656.12; the safeguards already in place at the Backlog Processing Centers to confirm the bona fide nature of applications; and the PERM program's strict employer registration requirements. Another commenter stated it is concerned about the elimination of substitution in small town or rural areas where employers have great difficulty finding qualified engineers, and requested the Department relax its requirements for rural or small town situations. One commenter suggested that in order to limit occurrences of fraud, DOL should limit the prohibition on substitutions to filings made under section 245(i) of the INA. As an alternative, the commenter suggested the establishment of an exception to the rule for large corporations. The commenter also suggested the Department could establish appropriate criteria to allow employers who, for example, have a demonstrated record of filing appropriate labor certification applications to use substitutions. The Department disagrees with these comments. The heightened enforcement measures in the PERM program are designed to catch fraud ``in process'' and do not address fraudulent activity that transpires thereafter, as the new substitution policy will. Further, the prohibition on substitution is not designed as a fraud detection mechanism, but rather as one of several protective measures to altogether prevent fraud related to this activity by preventing the commodification of labor certifications. The prohibition will be more effective because it will cover applications filed under 20 CFR part 656 in effect before and after March 28, 2005. Further, while we agree that other fraud prevention and detection methods may be available, the effectiveness of those other methods does not remove the need for additional, targeted techniques like those instituted in this Final Rule. For example, we are well aware of other laws, such as those governing perjury, that support detection and prosecution of fraud. However, such statutes are not always sufficient to prevent, deter and/ or redress unlawful conduct. By removing the opportunity to engage in the fraudulent activity, this rule permits existing investigative and prosecutorial resources to be better focused, and frees resources across government agencies for other pressing needs. We have no programmatic evidence that applications filed under section 245(i) are particular sources of fraud. In addition, this suggested alternative would result in a one-time solution, since the INA section 245(i) cases have already been filed and are being processed in the Department's Backlog Processing Centers. Further, such a policy would establish unequal rules for employers based upon the unsupported assumption that applications filed under section 245(i) are the only ones in which substitution fraud occurs. Labor certifications issued for 245(i) cases are indistinguishable from others and require the same steps of employers; absent a strong rationale, they should not be subject to different conditions or limitations than the limitations that attach to other labor certifications. We also do not agree that exceptions for large corporations or for rural areas are warranted. Exceptions for certain categories of employers, as suggested by commenters, do not further the Department's obligation to ensure a sufficient test of the labor market for the admission of each alien each time a job opportunity opens. We also have determined that it is not wise to establish a list of pre-approved employers, in part because the types of fraud we are targeting by this Final Rule are in some cases committed by attorneys and agents without the knowledge of the employer named on the application. 3. Change in Conditions That Originally Warranted Allowance of the Practice Various organizations provided comments concerning current processing times and the Department's remaining backlog of permanent labor certification applications in relation to the proposed ban on substitution. These commenters generally took issue with the Department's premise that substitutions are no longer needed to accommodate application processing delays. Some commenters questioned the premise based on the number of applications pending at the Department's Backlog Processing Centers and experiences to date with applications filed under the PERM system. They stated even if the Backlog Processing Centers meet what appears to be an unrealistic backlog elimination goal, the premise is quite obviously false. For example, one commenter stated it has 1,100 pending, unadjudicated labor certification applications and that, in many cases, because of the multi-year adjudication times for these applications, the original alien beneficiary has already moved on to a new position and the employee currently in the position has become the new intended beneficiary of the application. Another commenter referred to over 1,000 Reduction-in-Recruitment applications pending at the Department's Backlog Processing Centers, and stated about half of all of its PERM applications still remain pending for up to five months from date of submission. Both commenters suggested the Department should continue its efforts to eliminate the backlog and to speed up the PERM process prior to considering changes to the practice of substitution. The Department disagrees. The agency operating conditions under which alien substitution was initially permitted have noticeably changed. The Department acknowledged in the preamble of the proposed rule that the strongest historical argument in support of substitution has been the length of time it once took to obtain a permanent labor certification. 71 FR at 7656, 7659 (February 13, 2006). However, the Department also noted the streamlined process introduced by the PERM regulation has significantly reduced the labor certification processing time for applications filed under the new system. Since the PERM program began accepting applications on March 28, 2005, 68 percent of the certified applications have been processed in less than 60 days. And in FY 2006 alone, approximately 75 percent of the certified applications were approved in 60 days or less. In addition, the PERM system will continue to improve as we gather baseline information from which to implement process improvements. In other words, we expect applications to be adjudicated at least as quickly in the future as the system builds upon its knowledge base. With respect to the pending applications at our Backlog Processing Centers, we have significantly reduced the number of backlogged applications from an estimated 365,000 to less than half that number. This effort places us on target to meet our goal of eliminating the backlog by September 30, 2007. Thus, the argument in support of allowing substitutions to continue because of long processing delays has been appropriately addressed by both the new, streamlined PERM process and the large reduction in backlogged applications. In light of these changes, [[Page 27912]] we believe it is imprudent to wait to adopt this rule, as some commenters suggest, until all backlogs are completely eliminated, thus giving those who wish to fraudulently use substitutions additional time to do so. 4. Extending Regulation to Pending Applications for Permanent Labor Certification and to Approved Certifications The Department received a number of comments opposing the application of the substitution ban to applications filed under 20 CFR part 656 in effect either before March 28, 2005, or on or after March 28, 2005, and to certifications already granted. These commenters urged the prohibition on substitution should be limited to only those applications filed under the current streamlined regulation and should not encompass any applications filed under the 20 CFR part 656 in effect before March 28, 2005. Commenters stated employers and employees across the country have made critical hiring and transfer decisions in reliance on the availability of substitution. They stated that by applying the rule change to all substitutions except those approved by the effective date of the Final Rule, the Department would be setting itself up for further challenges and pressures. The commenters cited Bowen v. Georgetown Univ. Hospital, 488 U.S. 204 (1988), asserting it supported their contention that a Federal agency lacks the power to issue retroactive rules absent a statutory grant of authority. They contended it is unfair, and most likely unlawful, for the Department to change the rules midstream, and that any change in the rules governing substitution should only be prospective in effect. Others commented that the Department's proposed regulation constitutes a retroactive ban that raises legal questions. Some stated the proposed rule improperly seeks to retroactively invalidate approved labor certification applications, when such approval was obtained under the current rule that such certifications are ``valid indefinitely.'' Others stated the proposed application is contrary to the prohibition on retroactive agency rules as found in the Administrative Procedure Act (APA). They noted that, under the APA, a rule is defined as the whole or part of an ``agency statement of general or particular applicability and future [emphasis added] effect designed to implement, interpret, or prescribe law or policy.'' Commenters stated the Department would need specific authority from the Congress to promulgate retroactive regulations. Several commenters referenced Health Ins. Assn. of America, Inc. v. Shalala, 23 F.3d 412, 423 (D.C. Cir. 1994) for the proposition that, under the APA, rules may only have future effect. The court cited Justice Scalia's concurrence in Bowen v. Georgetown Univ. Hosp., 488 U.S. 204, 216-23 (1988), which interpreted the APA to mean that a rule is a statement that has legal consequences only for the future and found that a rule that alters a future regulation in a manner that makes worthless substantial past investment incurred in reliance upon the prior rule may for that reason be found ``arbitrary'' or ``capricious.'' One commenter asserted the proposed provisions eliminating substitution would be illegal retroactive rulemaking because employers have filed applications with the expectation of substitution as a potentially significant benefit should the original beneficiary drop out, and this benefit is a form of a property right. One commenter argued the application of the rule prohibiting substitution to backlogged applications under the pre-PERM regulation was retroactive in nature and could be read as an attempt to force the time and expense of the new application under the PERM process on employers who already have an investment in applications in the backlog. The commenter said this would amount to a taking of a business investment without just compensation. Similarly, another commenter asserted the elimination of substitution constitutes a ``taking without compensation'' of an employer's significant investment in the preparation and filing of pending and approved labor certification applications. The commenter stated the prevention of an unknown and possibly insignificant level of fraud and abuse does not justify this devaluation of a company's investment. The commenter went on to observe that eliminating substitution would disproportionately impact large high-tech employers, which file large numbers of applications. Finally, this commenter stated years of processing delays have spurred employers to build substitution into a business practice as part of their respective programs. In a similar vein, other commenters stated the prohibition of substitution is detrimental to parties who have relied on the current practice. Estoppel, they said, warrants that a person who has rightfully relied on a practice should get the benefit of that reliance. Employers and beneficiaries have depended on the ability to substitute and have foregone filing new applications because they planned to use an application for a previous employee for a current employee. One commenter argued that due process considerations of fair notice, reasonable reliance, and settled expectations, affirmed in Immigration and Naturalization Service v. St. Cyr, 533 U.S. 289 (2001), should compel the Department to strip from the rule any provision applying the ban on substitution retroactively. This commenter asserted that, based on that case law, the 1996 Memorandum of Understanding between the Department and the Immigration and Naturalization Service delegating to INS responsibility for substituting a named beneficiary on a labor certification, and longstanding agency practice, the Labor Department may not now retroactively divest USCIS and employers with pending labor certification applications of the legal right to engage in the practice of substituting alien beneficiaries. This commenter further stated that if a case has not yet been adjudicated, it is difficult to imagine any harm resulting from a legitimate employer substituting a new beneficiary on the pending application. Other commenters also pointed out the hardship that the ban on substitution would cause to certain aliens. They stated prohibiting substitution on applications pending prior to the effective date of the rule will render countless beneficiaries who are subject to the American Competitiveness in the Twenty-First Century Act (AC21), Public Law 106-313 (October 17, 2000), stranded and unable to extend their current stays, since such extensions depend on the existence of either a permanent labor certification application that has been pending for 365 days or more or a pending Form I-140 petition. As an alternative to the proposal, one commenter recommended that substitution remain available for all cases currently pending at a Backlog Processing Center. The commenter also recommended substitution remain available for all cases as long as the employer can demonstrate it has engaged in some additional recruitment and can document there are no qualified U.S. workers available. One commenter recommended the substituted beneficiary should be assigned the priority date of the date of substitution or, in the event substitution is prohibited, that the prohibition start with the effective date of the rule, and not be applied retroactively. One commenter suggested a grace period prior to the ban becoming effective. [[Page 27913]] We have carefully reviewed these comments and find they do not present sufficient grounds to overcome the rationale reflected in the NPRM to prohibit the practice of substitution on all labor certifications issued after the effective date of this Final Rule. Assertions that the prospective ban on substitution of aliens is, instead, a retrospective ban are misplaced. Past substitution requests that already have been approved are unaffected by this rule. Current substitution requests pending on the effective date of this rule will continue to be processed. Even though substitution will not be permitted with respect to labor certifications granted prior to this rule's effective date and may upset expectations based on part 656 as it previously read, that does not make the ban retrospective. The question of whether a rulemaking activity has a ``retroactive'' impact that renders that rule invalid is more complex than the commenters suggest. The United States Supreme Court has ruled that ``[a] statute does not operate `retroactively' merely because it is applied in case arising from conduct antedating the statute's enactment.'' Landgraf v. USI Film Products, 511 U.S. 244, 269 (1994). The Court went on to note that determining whether a statute is improperly retroactive requires the application of ``familiar considerations of fair notice, reasonable reliance, and settled expectations. * * *'' Id. at 270. Application of the Landgraf principles led the Court to reject a retroactivity challenge to the application of the Foreign Sovereign Immunities Act to wrongdoing that occurred prior to that law's enactment. Republic of Austria v. Altman, 541 U.S. 677 (2004). These same principles recently led an en banc Sixth Circuit to uphold the application of a change in Social Security Administration disability regulations to pending cases. Combs v. Commissioner of Social Security, 459 F.3d 640 (6th Cir. 2006). The Sixth Circuit followed the same approach in finding that there was no impermissible retroactive effect in applying certain amendments to the INA relating to the discretionary removal of relatives to aliens in the U.S. who sought to invoke the prior procedure. Patel v. Gonzales, 432 F.3d 685 (6th Cir. 2005). After applying these principles to the current rulemaking, the Department has determined its proposal is appropriate. An application for permanent alien labor certification is filed at DOL with the employer-applicant's expectation that it will satisfy the exclusionary provision in 8 U.S.C. 1182(a)(5)(A), so as to support a petition to DHS to import the alien beneficiary of the certification. That remains unchanged by this rule. The Department has provided ample notice of its intention to eliminate substitution, sufficient for employers and their representatives to reduce or eliminate continued reliance on the practice. As early as 1991, we indicated our intention to discontinue the practice. 59 FR at 54920, 54925-54926 (Oct. 23, 1991). When the PERM Final Rule was published in 2004, its preamble discussed at some length questions relating to the practice of substitution, the Department's findings of an emerging market for fraudulent sale of labor certifications, and DOL's intent to examine the practice and ``explor[e] in the near future regulatory solutions to address this issue.'' 69 FR at 77363 (Dec. 27, 2004). In the NPRM to this Final Rule, the Department again announced its intent to eliminate substitution. Thus, we are confident public notice and comment has been fair, open, and consistent with the Administrative Procedure Act. Any employer who has an application pending but who is either unable or unwilling to continue to sponsor the original alien has had more than sufficient opportunity to identify a new alien and take advantage of the past procedures. We have determined that employers cannot demonstrate they reasonably relied on the prior practice. In filing an application for permanent labor certification, an employer is expressing its intent to and expectation that it will hire the alien named on that document if the application is approved. An employer's hypothetical need to substitute, should the first alien no longer be available, is not tantamount to detrimental reliance on an ability to do so. Commenters offered no explanation of how an employer's initial filing can be made in reliance on a future ability to[acute]substitute. The risk any employer sponsoring an alien takes is that the alien will not remain an employee through the entire permanent residence process, or at the end of that process, and the option of simply inserting another alien has never been an entitlement. The INA's rule of inadmissibility of immigrant workers without a test of the labor market for available U.S. workers, the statute's requirement that admissibility be determined for each alien individually, and the statute's overall protection of employment rights of U.S. workers, each further supports the Department's position. With respect to the claim of employer expectations of an option to substitute, the statute makes clear that an employer has no absolute right to a labor certification, and certainly no property interest in one. Employers, particularly regular users of the system, have known about the Department's intent to end the practice of substitution since the publication of the PERM regulations in 2004. No employer could after that date have had any reasonable expectation that the practice would be indefinitely available. Several commenters appear to argue that once they have applied for or secured a labor certification for a particular alien in a particular job, they have a right to bring in any alien they choose for that job. The statutory scheme, with its focus on individual aliens and presumption of each alien's inadmissibility, belies that argument. Further, it is appropriate to apply the prohibition on substitution to the cases in our Backlog Processing Centers to ensure these needed fraud protections are applied throughout all permanent labor certification cases, regardless of where they reside in terms of processing. Accordingly, the Department has determined that, following the effective date of this Final Rule, the elimination of alien substitution will apply to all permanent labor certification applications pending with the Department and to all permanent labor certifications issued under the current or prior regulation. This Final Rule does not nullify substitutions already made or in progress, whether by the Department or DHS, but rather prohibits substitutions in the future, substitutions which employers presumably do not anticipate and are not planned and, hence, to which there is no right or reasonable expectation. No labor certification may be the subject of a substitution request submitted on or after the effective date of this rule. This rule places no additional responsibilities on recipients of labor certifications approved prior to the effective date. At the time of certification a benefit was granted; none was waived. The required wage rate remains unchanged for employers. No further recruitment for U.S. workers is required of the employers under approved labor certifications. Once the certification is filed with DHS in support of a visa petition, and if the employer and alien comply with all other applicable provisions of the immigration laws, the alien beneficiary will be admitted as a permanent resident. All that is changed is that the employer now will be encouraged to retain its original alien beneficiary (perhaps to that alien's benefit) or will [[Page 27914]] have to file a new application on behalf of a new alien. An employer seeking to substitute, in fact, always has had to engage in a limited test of the labor market. When the original alien beneficiary no longer is available for the job opportunity, the employer has had to recruit the substitute alien, either domestically among nonimmigrants, or abroad to import a new foreign worker. This rule would make that labor market test include not just foreign workers, but also U.S. workers, at prevailing wages and working conditions. The standards in 8 U.S.C. 1182(a)(5)(A) ``are quite broad. The Secretary must decide whether there are sufficient U.S. workers who are `able, willing, qualified, and available,' and whether the alien's employment would `adversely affect the wages and working conditions' of these workers. The statute leaves to the Department a broad area for the exercise of its discretion in issuing labor certificates.'' Industrial Holographics, Inc. v. Donovan, 722 F.2d 1362, 1365-1366 (7th Cir 1983). In the exercise of her discretion to issue labor certifications, the Secretary is within the extensive bounds created by the INA. Id. If the employer files a new application, it will be considered fairly and on its own merits. If approved, the new labor certification will be for a more current wage rate and subject to a more current labor market test, to the benefit of the new alien and/or U.S. workers similarly employed. This is within the intent of the statute, and is an appropriate preventative measure given the deleterious effect caused by substitution in the past. Given the Department's expressed concerns about fraud in the labor certification process, particularly with respect to substitution, and the emerging ``black market'' in status as a beneficiary of a labor certification, DOL sees a compelling need to protect the program's integrity regardless of the processing status of a certification on the effective date of the final rule. The Department's duty also to protect job opportunities for U.S. workers, and the welfare of both U.S. and foreign workers, makes it necessary to end the process of substitution after the effective date. See section I.D of this preamble, above. Effect on aliens who are H-1Bs and not entitled to benefit from substitution after the fifth year--The Department also received comments regarding the effect of the substitution ban on nonimmigrant aliens on whose behalf viable labor certifications have not been filed by the end of their fifth year in H-1B status, and specifically on these aliens' ability to adjust their status to that of immigrants. Under current law, nonimmigrant H-1B visa holders in their sixth year of H-1B status who are named on permanent labor certification applications that have been pending for 365 days or more qualify--upon petition to USCIS--for extension of their H-1B status in one-year increments. AC21, section 106(a). Currently, USCIS allows visa holders in H-1B status who are substituted into labor certification applications by the end of their fifth year to extend their nonimmigrant status beyond the normal six-year maximum. Commenters argued H-1B visa holders who are unable either to have a permanent labor certification application filed on their behalf or to be substituted into an existing application by that time will lose the opportunity for additional extensions of H-1B status. The Department understands concerns that, as a result of this rule, H-1B nonimmigrant aliens who, after five years of employment in the United States, are not yet the beneficiary of a permanent labor certification application might not be permitted by USCIS to further extend their H-1B status prior to obtaining U.S. permanent resident status. However, the Department finds that continuing substitution as an accommodation to this small group of individuals, a group whose numbers and participation in the program are both speculative, is disproportionate to the adverse consequences of continuing the substitution practice which creates both an incentive and opportunity for fraud, and which deprives U.S. workers of job opportunities. Some commenters have suggested that since AC21 increased the portability of H-1B visas, allowing such nonimmigrants to change employers, substitution by these foreign workers should continue to be allowed. Public Law 106-313, sec. 105. The Department sees no reason, as a general matter, to permit one type of nonimmigrant to continue benefiting from the practice of substitution over other nonimmigrants. The portability provision seeks to increase flexibility for a specific group of nonimmigrants--H-1B aliens--under a specific set of circumstances; it governs transfers between positions which aliens fill on a temporary basis, and is triggered by the filing of a new LCA and petition. It does not address, and does not extend to, substitution, which is a function of the permanent residence process. The statutory permission to move from one employer to another as a procedural accommodation does not in turn mandate increased flexibility through substitution in the permanent residence process. These commenters' analysis incorrectly pairs portability with the extension beyond the six-year H-1B employment limit allowed by section 106(a) of AC21. The Department finds that analysis flawed. The INA dictates that after six years, H-1B status must terminate. The specific exceptions to that termination are linked by AC21 to harm resulting from permanent residence backlogs, including backlogs in the permanent labor certification program. The extension beyond six years is intended by the statute to benefit an H-1B worker when 365 days or more have elapsed since the filing of a permanent labor certification application ``on the alien's behalf (if such certification is required for the alien to obtain status under such [INA] section 203(b)) * * *.'' Public Law 106-313 section 106(a)(1). Clearly, the alien intended to be helped by this provision is the alien who may have been prejudiced by the backlog in processing labor certification applications under DOL's pre- PERM regulations. An H-1B worker seeking substitution may have benefited by working in the U.S. for six or more years, but has not necessarily been affected by the backlog at all. It is not inconsistent with the statutory intent of AC21 to limit the ability of that alien to continue his or her nonimmigrant status to a labor certification filed on his or her behalf rather than on someone else's behalf. The Department recognizes that those aliens who fall outside the five-year mark will potentially be unable to extend beyond the sixth year of H-1B status and otherwise might have been able to do so through substitution. This small group of affected individuals, however, does not present sufficient equities to persuade the Department to carve out an exception to the prohibition on substitution, since employers in such situations have had upwards of five years in which to initiate permanent resident status on their behalf. Further, extension of an alien's nonimmigrant visa status is the province of USCIS, not the Department of Labor. The Department's mandate is not to preserve the opportunity or further the potential opportunity in all circumstances for an employer to hire an immigrant worker, nor is it a process driven by the interests of any or all aliens who may wish to enter the U.S. through employment-based immigration. The Department's mandate, rather, is to design and implement a secure framework within which an employer with legitimate business needs may determine the availability of U.S. workers and, if such [[Page 27915]] workers are not found, bring in a foreign worker. Moreover, because the Final Rule prohibits only substitutions which have not yet been made, aliens who have not otherwise begun the permanent residence process before the end of the fifth year of H-1B status presumably do not anticipate and therefore cannot claim a reasonable expectation of benefiting from substitution. 5. Effect of the Elimination of Substitution on Employers The Department received many comments addressing the perceived hardships employers would suffer if substitution were prohibited. Added cost and burden--Employers were concerned about loss of their investment in the first application; the loss of an important employee retention and recruitment tool; added cost and burden from a new application, including advertising and recruiting costs, staff time, legal fees; inherent delays to getting a new worker in place, and potential processing delays with the Department or other agencies; additional costs from other parts of the petitioning and visa application process; loss of place in the queue given visa retrogression; and retardation of business growth and loss of competitiveness from potential delays in getting products to market. Some pointed to the potential negative impact on special groups, such as high-tech employers, nonprofits, or businesses located in rural areas. One commenter stated that each set of costs should not be viewed in isolation, but rather multiplied by the number of applications for each employer, and the large number of employers that must respond to labor mobility and unforeseen business changes. Despite a lack of consistent information from commenters on the additional costs associated with new filings, the Department is aware of and sensitive to the time and expense employers absorb to recruit and retain a qualified workforce. However, the costs associated with the employment-based immigration process, including the costs incurred by employers requesting permanent labor certification, have been an accepted part of the labor certification process for almost 30 years and are not unanticipated by the statute. The INA presumes inadmissibility of each alien, and requires the presumption be overcome for each foreign worker through, in part, the Secretary of Labor's determination. A demonstration of worker unavailability is inherent to the process of filing a labor certification application, and it is not unreasonable or inconsistent with the INA to require recruitment every time an employer seeks to bring in a new foreign worker. Recruitment activities and the costs associated with them are equally as appropriate for the would-be substituted foreign worker as they were for the originally named alien. Accordingly, while we are sensitive to employers' concerns, we must nevertheless conclude that elimination of the current substitution practice is amply justified notwithstanding. In addition, the Department fully recognizes that substitution has become a tool to address visa retrogression. However, the Department is not convinced it should retain a policy on substitution that gives rise to significant fraud and may adversely affect U.S. workers as a means to cope with the visa cap issue, or to support any unintended cost savings for employers that may have resulted from this practice. Loss of priority date--Many commenters expressed concern over the loss of the visa priority date when a new application is required to hire a new alien. Our program experience indicates that the priority date plays a defining role in the commoditization of labor certifications; substitution enhances the labor certification's marketability. Commoditization stems from the ability to substitute aliens on labor certifications, which are valid indefinitely, while maintaining the priority date of the original filing. Indeed, the priority date is often a prime motivator for the marketability and added value of labor certifications. It is also not necessarily true that the availability of substitution is beneficial to aliens as a class. As stated in the NPRM, under the substitution process currently in place, the new alien beneficiary is inserted into an in-process application or certification initially filed for a different alien and with a filing date that is often years earlier than the substituted alien would have received if named in a newly filed application. We are aware of concerns that these practices make substitution fundamentally unfair to other aliens (and their petitioning employers) seeking to immigrate to the U.S. who remain below the substituted worker in the visa priority date queue, as well as to U.S. workers. See 71 FR 7656 (Feb. 13, 2006) and 56 FR 54920 (Oct. 23, 1991). The need for a new labor market test and the Department's interest in removing aspects of the current process creating incentives for fraud, combined with the inequity to other aliens waiting in the visa queue who have not been substituted in, outweigh the harm to an individual employer and alien from the loss of a priority date on a given application. In addition, the reasoning that the employer suffers a hardship from the inability to apply an earlier priority date to a subsequent application rests on an unsupported assumption that another test of the labor market would not yield a qualified and willing U.S. worker. We do not agree with this reasoning and find it contrary to our statutory responsibility to protect U.S. workers, as well as virtually impossible to legitimately accommodate in the administration of the permanent labor certification program. B. Prohibition of Modifications to Applications The proposed rule sought to clarify procedures for modifying applications filed under the new permanent labor certification regulation and, in particular, to prohibit modifications to applications once filed with the Department. We received numerous comments raising concern over this new provision. After careful consideration of these comments and for the reasons set forth below, this Final Rule codifies the new provision at Sec. 656.11(b) with slight changes from the NPRM, clarifying that requests for modifications to an application submitted under the PERM regulation will not be accepted where the application was filed after this Final Rule's effective date. In considering how to implement the ``no modification'' provision, while ensuring due process to applicants for labor certification, we have determined that it is advisable to revise the language of Sec. 656.24(g) to more precisely define what documentation may be submitted with a request for reconsideration. Codifying the ``no amendments'' requirement through notice and comment--As explained in the NPRM, the clarification made by this Final Rule is consistent with the streamlined labor certification procedures governed by the regulation that went into effect March 28, 2005. Nothing in the regulation contemplates permitting employers to make changes to applications after filing. That practice was one the Department specifically sought to change through the Final Rule implementing the re-engineered PERM program. The re-engineered program is designed to streamline the process, and an open amendment process that either freely allows changes on applications or results in continual back and forth exchange between the employer and the Department regarding amendment requests is inconsistent with that goal. Further, the re-engineered certification [[Page 27916]] process has eliminated the need for changes. The Department has instituted screening and guideposts for electronic permanent labor certification applications. The online application system, especially in light of the technological enhancements described below, allows the user to proofread, revise, and save the application prior to submission, and the Department expects users will do so. ETA has received frequent, positive feedback from stakeholders on what they have found to be the time and cost-saving nature of this review. Moreover, in signing the application, the employer declares under penalty of perjury that it has read and reviewed the application and the submitted information is true and accurate to the best of its knowledge. In the event of an inadvertent error or any other need to refile, an employer can withdraw an application, make the corrections and file again immediately. Similarly, if an employer receives a denial under the new system, it can choose to correct the application and file again immediately if it does not seek reconsideration or appeal. Immediate feedback on deficiencies or deniability prior to submission of an application--Prohibiting the modification of applications will allow the Department to process employer applications more quickly and support greater uniformity and consistency in their adjudication. However, as part of our continuing upgrades to PERM processing capabilities, as well as in response to comments on the NPRM and the suggestion by the BALCA in its decision in In the Matter of HealthAmerica, No. 2006-PER-1 (July 18, 2006), we have dramatically increased the nature and number of system ``prompts'' and warnings in an effort to provide employers and others with additional opportunities for correction prior to submission of an application. The Department has added system capabilities in the form of ``pop- up'' edit alerts to notify each applicant when a response to a question is technically in conflict with either the PERM regulation or certain of the formal instructions for completion of the form. The applicant is allowed to continue, but with full warning of possible deniability. The system permits submission of the application, but the applicant assumes the risk that the application will be denied based on the failure to fully comply with the technical requirements and alerts of the program. This electronic advisory system is much more detailed and more robust than anything available previously to online users, and it is continuing to reduce the type of automated denials that gave rise to HealthAmerica. The majority of form preparation errors that have occurred to date will now generate an automated prompt, warning the filer that it may have entered erroneous information that may cause a denial of the application. As described above, similar manual mechanisms are in place to detect and correct errors on mailed applications. The Department reiterates, however, the fundamental responsibility to submit an application which does not contain typographical or similar errors remains with program users. Under the system upgrades now in place, applications containing errors in contravention of system alerts are denied. Consistent with the ``no modifications'' policy codified by this rule and the evidentiary parameters of the revised Sec. 656.24(g) described below, requests for reconsideration based on such denials will not be granted, where an application filed after this rule's effective date is at issue. Requests for reconsideration based on such denials involving applications filed prior to this rule's effective date will be reviewed on a case-by-case basis; they will be placed in the appropriate queue and reviewed on a ``first in, first out'' basis and as workload permits. Evidence in support of requests for reconsideration and amendment of Sec. 656.24(g)--We have made one change from the NPRM in this Final Rule based on the BALCA's decision in HealthAmerica. Among other issues, the Board addressed the meaning of the current Sec. 656.24(g) governing requests for reconsideration. That section provides that reconsideration requests ``may not include evidence not previously submitted.'' The Board concluded that evidence ``previously submitted'' encompassed material in the possession of the employer at the time of filing. That reasoning was the basis for the Board's decision that allowed the employer to modify its application to correct a mistake. To the extent the BALCA favored allowing the employer in HealthAmerica to present evidence that effectively changed the response to a question on the application, the BALCA's approach is inconsistent with the Department's objective and the NPRM proposal that applications cannot be changed or modified after submission. However, the Department recognizes that there will be situations where--although an employer will not be permitted to amend its response to a question as it did in HealthAmerica--it may nonetheless be appropriate to consider information not previously in the Certifying Officer's (CO's) physical possession in order to provide appropriate evaluation of the employer's request for reconsideration. The Department has determined an approach that allows for submission with a motion to reconsider of documentation in existence at the time of filing and held by an employer as part of its compliance responsibilities under the PERM recordkeeping requirements is appropriate. Accordingly, we have adopted a modified approach to that proposed in the NPRM, continuing to prohibit application modifications but recognizing the appropriateness of an opportunity to present and consider evidence that was generated to comply with record retention requirements of the PERM program. Accordingly, the Department is including as part of this Final Rule a revised Sec. 656.24(g) setting the new standard for applications filed on or after the effective date of this Final Rule. The new Sec. 656.24(g) describes the evidence that can be submitted with a motion to reconsider and clarifies the interplay with the no-modification provision of Sec. 656.11(b). The revised Sec. 656.24(g) limits evidence submitted at reconsideration to documentation that the Department actually received from the employer in response to a request from the Certifying Officer to the employer; or documentation that the employer did not have an opportunity to present to the Certifying Officer, but that existed at the time the application was filed, and was maintained by the employer to support the application for permanent labor certification to meet the documentation requirements of Sec. 656.10(f). Revised Sec. 656.24(g) also provides that the Department will not grant motions to reconsider where the deficiency that caused denial resulted from the applicant's disregard of a system prompt or other direct instruction. These changes together adequately ensure that employers and others have sufficient opportunity to present evidence on salient points, even if denied that opportunity during the application's consideration, while enabling the PERM program to function in its intended streamlined manner. 1. Issues Raised by Public Comments Authority to limit modifications to an Application for Permanent Employment Certification--Many commenters questioned the Department's authority to limit and prohibit an employer's ability to modify a Form ETA 9089, Application for Permanent Employment Certification. We disagree. Federal [[Page 27917]] agencies have the authority, and sometimes the necessity, to write strict procedural rules in order to manage their respective responsibilities. HealthAmerica, slip op. at 17. Our past practice and program experience led us to make regulatory changes in the nature of the permanent labor certification program, changes that were publicized through extensive stakeholder outreach and during numerous public meetings across the country. The resulting efficiency and effectiveness measures have contributed to overall program productivity increases and have reinforced, among other factors, the critical need to discontinue what has historically been continual, unduly time-consuming communication between ETA Certifying Officers and employers or their representatives. The Department recognizes that the accountability-based standard it put in place in PERM was, at least for purposes of the modifications issue, not made sufficiently clear in the text or preamble to the original December 27, 2004 Final Rule. The BALCA pointed out in its HealthAmerica decision that a requirement for precise filing can be imposed with proper notice, citing Glaser v. FCC, 20 F.3d 1184, 1186 (D.C. Cir. 1994); Salzer v. FCC, 778 F.2d 869, 875 (D.C. Cir. 1985); JEM Broadcasting Co., Inc. v. FCC, 22 F.3d 320 (D.C. Cir. 1994); Florida Cellular Mobil Communications Corp. v. FCC, 28 F.3d 191 (D.C. Cir. 1994). In these cases, the D.C. Circuit found the FCC could appropriately and legitimately write regulations requiring certain license applications be ``letter-perfect'' (i.e., complete and sufficient) when submitted because the requirement was provided for in agency regulations that had been subject to notice and comment. The BALCA noted the issuance of the NPRM as evidence that such a ``letter- perfect'' requirement did not exist under the PERM regulations as initially issued. This rulemaking satisfies public notice and comment objectives. Relationship to fraud--One commenter suggested the Department is insinuating that any request for modification is grounded in fraud. We disagree. As we have stated, the ``no amendments'' clarification in this rule simply codifies a policy the Department assumed was part and parcel of the re-engineered program, and which was an (albeit unstated) assumption of the PERM Final Rule. The ``no modifications'' policy furthers administrative efficiency. In addition, it protects against certain program abuses, such as the submission of a form with incomplete or inaccurate information simply to save the priority date. Thus, the policy serves a number of purposes not limited to fraud prevention. Need for modifications--Many commenters stated modifications to applications were necessary because alleged errors made by the Department in reviewing mailed-in applications led to erroneous case denials. For example, the Department issued denials for failure to include the language that the employer would accept ``any suitable combination of education, training, or experience,'' when, in fact, the language was included in the application. Further, commenters stated other applications have been denied because the Department allegedly stated the alien did not possess the required academic credentials when, in fact, he or she did, and those credentials were clearly noted in the application in the appropriate place. Commenters suggested in the event of an inadvertent error, there are many reasons why refiling is not usually a viable alternative, thus making modifications necessary. For instance, they stated that often an application preparer is not aware an error has been made at the time the employer submits the electronic Form ETA 9089. Even if the mistake comes to light before the Department issues a denial, it may be too late to re-file because the recruitment may have become stale. Further, certain post-filing, pre-certification events, including but not limited to changes in corporate structure resulting in a change of employer name, tax identification number, or address, may require the amendment of the application. One commenter suggested the inability to modify inadvertent mistakes could have serious ramifications as such a mistake may result in an inability to refile the application, cause a denial of the application, or be construed as a false statement. The Department disagrees that these comments require alteration of the no-modifications policy reflected in the NPRM. As outlined above, going forward, electronic system prompts will most often alert the employer or its agent to the grounds for deniability, so a filer will be able to learn prior to submitting the application if the system would deny the application as currently completed. Further, as always, an employer has the right to seek reconsideration and beyond that, appeal to the BALCA, when it believes a denial was unjustified, without loss of the priority date which attached to the application. Hence, the ``no modifications'' policy does not institute a standard not previously envisioned, and does nothing to limit or undermine employer due process rights. When filing the Application for Permanent Employment Certification, the employer certifies and declares under penalty of perjury that it has read and reviewed the application, and the information provided therein is true and accurate to the best of its knowledge. The Department understands that human error occurs in limited circumstances, which is why we have elected to increase our system ``prompts'' to help avoid such errors. These additions sufficiently address commenter concerns. Further, the Department believes it is capable of distinguishing between typographical or inadvertent errors and willful false statements. Tailoring the ``no modifications'' policy--One commenter suggested the current regulations governing PERM should permit a single opportunity to the employer or agent to correct minor technical deficiencies. According to this commenter, applications should be decided based on their substantive merits instead of on non-material technical errors. The Department agrees that applications should be adjudicated upon their respective merits. However, typographical or similar errors are not immaterial if they cause an application to be denied based on regulatory requirements. The Department encourages those who submit applications to carefully review all information for completeness and accuracy and has modified the online application system to assist them to do so. Attentive filers will accrue the benefits of the new streamlined system, as ``clean'' applications are usually processed and adjudicated within 60 days of filing. Many commenters suggested it is highly unlikely that employers will need more than one opportunity to correct any minor technical deficiencies and the nature and number of technical errors is highly unlikely to have a significant detrimental impact on the overall efficiency of the PERM process. Commenters suggested the new system has, in fact, had a dramatic impact on the processing of applications for permanent labor certification through, among other things, centralization and implementation of new technology. According to these commenters, permitting a single opportunity to amend an application to overcome a non-substantive technical error will neither require substantial Department resources nor render the PERM system ineffective or inefficient. We disagree with the commenters'' premise that permitting modifications [[Page 27918]] will not negatively impact the processing and review of applications. The processing of requests for reconsideration of denials poses a significant, costly resource drain on the PERM case management system and staff. The opportunity cost and inequity to other employers are also high, as resources must be transferred from review of applications that do meet technical requirements to those that may not. Moreover, as we have discussed above, the alerts and prompts that we have built into the system will provide employers the opportunity to correct minor technical deficiencies before they ever submit their applications. This is a reasonable balancing of available resources. Therefore, the Department is finalizing the standard noted in the NPRM of not allowing modifications to an application. The revisions to Sec. 656.24(g) will enable employers to present evidence in a request for reconsideration that will permit filers the opportunity, if necessary, to present evidence outside the four corners of the application. Many commenters suggested it is reasonable to request that the modification prohibition, if adopted, should only apply to applications filed after publication of the Final Rule. We have adopted this suggestion. The changes to Sec. Sec. 656.11 and 656.24 contained in this rule apply only to applications filed after the effective date of the rule; they do not impact the processing of motions for reconsideration filed with respect to applications filed prior to that date. Concern prohibiting modifications will generate backlogs--One commenter suggested prohibiting modifications under proposed Sec. 656.11(b) would be an open invitation to intractable increases in backlogged applications, rather than the radical reduction in pending applications and processing times contemplated by the PERM reforms. The efficiencies created by the new system prompts, which are proving to be an effective screen for program users against system-generated denials for technical errors, as well as the ``no modifications'' policy put in place by this rule, will allow us to significantly reduce the pending queues of denied applications and, consequently, to process all other applications more quickly and effectively. Distinguishing policies for backlog and PERM--One commenter suggested the Department should clarify its position on modifications under the new PERM streamlined system, relative to applications filed with the Backlog Processing Centers, by clearly explaining the difference in treatment in the regulatory text. As proposed in the NPRM, the ``no modifications'' policy in this Final Rule will apply only to the PERM program since only the PERM regulation is amended in this Final Rule. In addition, this preamble describes more fully the process the Department will follow in its review of applications filed up to the effective date of the rule. This information provides sufficient notice of the expectations for employers and their representatives regarding the treatment of technical and other modifications going forward. C. Prohibition on the Sale, Barter, or Purchase of Applications for Permanent Labor Certifications and of Approved Permanent Labor Certifications, and Prohibition on Related Payments The proposed rule, at Sec. 656.12, prohibited the sale, barter, and purchase of applications and approved labor certifications, as well as other related payments. The Department received numerous comments on this proposal. Commenters overwhelmingly opposed Sec. 656.12(b), which would prohibit employers from seeking or receiving payment of any kind for any activity related to obtaining a permanent labor certification. After carefully considering comments received, the Department has decided to move forward on all provisions, but in response to comments has clarified the types of prohibited payments, as further described below. The prohibitions in this section will apply to all such transactions on or after the effective date of this Final Rule, regardless of whether the labor certification application involved was filed under the prior or current regulation implementing the permanent labor certification program. 1. Improper Commerce The proposed rule provided, at Sec. 656.12(a), that permanent labor certification applications and certifications are not articles of commerce and they may not be sold, bartered, or purchased by individuals or entities. The majority of comments favored the proposal, and only a few were in opposition. Some comments were ambiguous; it was not clear whether the commenters were commenting primarily on Sec. 656.12(a), prohibiting commerce in labor certification applications and certifications, or on Sec. 656.12(b), which prohibits several types of payments related to labor certification applications and certifications. The Department's extensive experience in the administration of this program leaves no doubt that some labor certifications are treated as commodities and sold at substantial gain by those who wish to engage in the existing secondary market. In one example from 2005, a joint investigation with DHS' Immigration and Customs Enforcement (ICE), the Federal Bureau of Investigation, the Department of State OIG and the Internal Revenue Service resulted in several employers, agents and attorneys being convicted of numerous visa fraud schemes. See U.S. v. Ivanchukov et. al. (No. 04-421, E.D. Va. 2005); see also DOL OIG Semiannual Report (October 1, 2005-March 31, 2006) (available at http://www.oig.dol.gov/public/semiannuals/55.pdf ). In the Ivanchukov case, labor certifications were being sold for as much as $120,000.00. As a reminder of how common this activity has become, one commenter to the NPRM for this rulemaking provided the Department with a website that advertises the sale of pre-approved labor certifications. The Department has reasonably concluded that there is a need to prohibit improper commerce in permanent labor certifications. Sale, barter or purchase--Two commenters indicated that prohibiting sale, barter, and purchase was one of the most effective amendments the Department could promulgate to reduce fraud in the permanent labor certification program, as it removes the economic incentive for unscrupulous behavior. Some commenters indicated the terms ``sold,'' ``bartered,'' and ``purchased'' were impermissibly vague. Other commenters stated the proposed ban on sale, barter, purchase, and related payments was overbroad and did not take into account that both employer and employee benefit when an employee obtains permanent residence. The Department acknowledges these concerns by adding definitions of the terms sale, barter, and purchase to the definitions at Sec. 656.3, and by specifying and clarifying what constitutes the ban on sale, barter, purchase, and related payments. A labor certification is a certification from the Department that there are no able, willing, and qualified U.S. workers available for the specific job opportunity stated on the employer's application. Converting this labor certification into a commodity is an example of selling, bartering, or purchasing. Many commenters suggested that if DOL wants to make selling labor certifications illegal, it should make such sales illegal and prosecute those who break the law rather than punishing everyone. We disagree that the rule punishes everyone; this aspect [[Page 27919]] of the rule only impacts an individual or employer when there is an actual sale. Further, our program experience clearly indicates that not ``everyone'' uses the substitution accommodation or wishes to sell labor certifications. One commenter suggested we should remove institutions of higher education from the prohibition on barter, sale and purchase, suggesting that the prohibition be tailored to industries where the prohibited activity has been shown to occur. The Department's rationale for prohibiting the sale of labor certifications is based upon a broader policy concern than the commenter implies. Any such activity is contrary to the statutory purpose of the program. There is no basis upon which to exempt one industry sector or type of employer. Further, as other commenters have stated, there is no legitimate reason for an employer to sell or barter permanent labor certifications. Further, if such activity is not occurring in a particular industry, then employers in that industry will not be affected by the prohibition. Attorneys' fees for preparing and filing labor certification applications--Two commenters supported the improper commerce provisions, contingent upon clarification that attorneys' fees for preparing and filing an application would not be prohibited or deemed a sale or purchase. It is not the Department's intent to prohibit attorneys from charging fees for preparing and filing labor certification applications for employers or to deem such fees by themselves to be a sale or purchase of the application or resulting certification. Corporate restructuring--One commenter was troubled that the proposed rule could be construed broadly to prohibit transfer of a labor certification that arises as the consequence of a merger, acquisition, spin-off or other type of corporate restructuring. The commenter went on to say the proposed rule could be construed to contradict the intent of the Congress in stating in AC21 that corporate restructuring should not have any adverse impact on the immigration process. According to the commenter, in cases where one company is acquired by another, the acquiring company often compensates the acquired entity for the cost of pending labor certifications and other types of applications. In other cases, the employer filing the labor certification application may spin off part of the company and wish to sell the pending labor certification to the spun-off entity so that it can be used to obtain a green card for the original beneficiary, who now works for that spun-off entity. According to the commenter, the proposed rule is ambiguous with respect to both of the above factual situations. The commenter requested the rule be clarified to state that the prohibition against sale, barter or purchase of labor certification applications and certifications does not apply to transfers stemming from legitimate corporate restructuring activities such as mergers acquisitions, or spin-offs. The Department did not intend this provision to govern corporate restructuring or internal corporate accounting and finance practices which exist independently of the permanent labor certification program. The Department has determined that further clarification on this question is not necessary. 2. Prohibition on Employers Seeking or Receiving Certain Payments, Including Payment of Attorneys' Fees As proposed, the rule would have added a new Sec. 656.12(b) to prohibit employers from seeking or receiving payment of any kind, from any source, for filing a Form ETA 750 or a Form ETA 9089 or for other actions in connection with the permanent labor certification process. The Department proposed to include in this prohibition a ban on payment or reimbursement, directly or indirectly, of any employer-incurred attorneys' fees and other costs related to the preparing, filing, and obtaining of a labor certification, whether payment was by the alien or another individual or entity. The Department received numerous comments in response to this proposal, most in strong opposition to the proposal. Following careful review of comments and weighing our growing program experience with this issue, and for the reasons explained in detail below, the Department finds the need for program integrity outweighs any interest in the ability of the employer to receive payment or reimbursement from the alien or others in exchange for the filing of a labor certification application, especially when such payment or reimbursement has led to abuse of the process or exploitation of individual aliens. The Department's unique responsibility to reduce the incentive for fraud in the permanent labor certification program while simultaneously protecting the rights and working conditions of U.S. workers requires us to focus on the nature of the payment that an employer would receive from an alien or others for costs or fees relating to the preparation and filing of the labor certification application or obtaining permanent labor certification. The Department's concern, which is shared by other Federal agencies, is that such a payment undermines the labor certification process by potentially corrupting the search for qualified U.S. workers and creating serious doubt as to whether the employer is offering a bona fide job opportunity and making it available for U.S. workers. Accordingly, consistent with the proposed rule, the intent of this Final Rule is to make it clear that employers who submit applications for permanent labor certification do so with the full understanding that the costs they incur for the preparation and filing of the application and obtaining permanent labor certification are to be exclusively borne by the employer. Thus, the Final Rule prohibits an employer from receiving payment of any kind as an incentive or inducement to file, or in reimbursement of the costs of preparation or filing of, an application for labor certification, including covering the costs of the employer's attorneys' fees, except as specifically provided for certain third-party payments. The Final Rule also prohibits an employer filing an application for labor certification from reducing the wages, salary or benefits of an alien named on the application for any expense related to the preparation and filing of the application. This prohibition includes the payment by the alien of costs (for recruitment or other activities in furtherance of the labor certification) as well as the employer's attorneys' fees. In addition, this Final Rule prohibits employers engaged in the labor certification process from withholding from an alien's wages, either in increments or in lump sum, any payment in reimbursement to the employer for costs associated with that process. As first described in the NPRM, prohibited payments include, but are not limited to: Employer fees for hiring the alien beneficiary; receipt of ``kickbacks'' of part of the alien beneficiary's pay, whether through a payroll deduction or otherwise; reducing the alien beneficiary's pay for purposes of reimbursement or pre-payment; goods and services or other wage or employment concessions; kickbacks, bribes or tributes; or receipt of payment from aliens, attorneys, or agents for allowing a permanent labor certification application to be filed on behalf of the employer. There are strong and ample grounds upon which to prohibit these payments or arrangements, including the payment by the alien of the employer's attorneys' [[Page 27920]] fees. Permanent labor certification is an employer-driven process; employers, not aliens, must file permanent labor certification applications. To the extent the alien beneficiary who is the subject of the labor certification application and, later, the immigrant petition, is financially involved in the application process directly or indirectly, this involvement casts suspicion on the integrity of the process and the existence of a bona fide job opportunity. Payment by the alien of employer costs allows him or her some level of control over what must remain an employer-driven process. The degree of that control, at least at the labor certification stage, directly and unduly influences the legitimacy of the job opportunity and whether that opportunity has been and remains truly open to U.S. workers. In other words, as stated in the NPRM, alien subsidization of employer-incurred costs adversely affects the likelihood that a U.S. worker will be offered the job when, for example, the alien is paying for the recruitment effort. The essence of this aspect of this Final Rule is that expenses that rightfully belong with an employer should not be transferred to an alien beneficiary or others. An alien is free to retain counsel to represent his or her interests in the labor certification process and also to assume responsibility for those costs. This Final Rule does not seek to regulate or control payments to, or the identity of, the alien's attorney. However, to the extent that any attorney is preparing or filing a labor certification application and thus engaged by the employer as well as with the alien, the costs attributable to work for the employer must be paid by the employer. Costs for attorneys' fees outside the labor certification process are not part of this rulemaking. The Department is aware of the import of its position--the implications are at the center of the reasons we find the prohibition a necessity. We recognize the vast majority of aliens for whom permanent labor certifications are filed are already employed by the employer. In initiating the permanent residence process, the employer demonstrates a desire to retain the alien on a more permanent basis than permitted by his or her nonimmigrant status. The pre-existing relationship provides the employer with significant incentive to conduct the recruitment process in a manner that favors the alien. The cost incurred in the labor certification recruitment process by the employer serves as an identifiable disincentive to that outcome. It serves at least to make the employer examine the value it places on retaining the alien. By requiring employers to bear their own costs and expenses, including the representation of the employer, the Department is ensuring that the disincentive to pre-qualify the alien in the job opportunity--keeping the job open and the recruitment real--remains in the process. This enables the Department to remain in its statutory role as the arbiter of the presence of otherwise-eligible U.S. workers in relation to the admissibility of the alien. The complexities associated with multiple-party financial involvement in the labor certification process are not new. The provisions in this section work in concert with other parts of the regulation and reflect the Department's determination to keep the recruitment process open, fair and available to U.S. workers. For example, as stated in the preamble to the final PERM regulation, evidence that the employer, agent, or attorney required the alien to pay employer costs may be used under the regulation at Sec. 656.10(c)(8) to determine whether the job has been and clearly is open to U.S. workers. The rule prohibiting the payment of an employer's fees or costs by the alien and the rule requiring the presence of a bona fide job offer, in turn, are consistent with the prohibition on sale and barter in the Final Rule, as they support the Department's desire to actively prevent and prohibit activities that directly commoditize permanent labor certifications. Under the authority of Sec. 656.10(c)(8) of the current regulation, Form ETA 9089 \2\ already requires employers to disclose and specify ``payment[s] of any kind [emphasis added] for the submission of [the] application.'' The decision to seek this disclosure as part of the information related specifically to recruitment reflects the Department's concern that such payments may adversely impact the availability of the job opportunity to the U.S. workforce. The provisions added by this Final Rule are simply a logical extension and clarification of the type of information the Department considers relevant to this concern.\3\ --------------------------------------- \2\ Section ``I. Recruitment Information,'' Subsection ``e. General Information,'' Question 3. \3\ In the PERM regulation, the Department reserved the right to request any information the Certifying Officer deems relevant to a labor certification application. 20 CFR 656.20(d). The existence of a bona fide job opportunity and the disclosure of payments are always relevant to the application. --------------------------------------- This Final Rule clarifies the application of Sec. 656.10(c)(8) to the issue of alien payment. It prohibits employer practices that require an alien to pay employer labor certification costs, including prohibiting practices that require the alien beneficiary to cover all labor certification costs, requirements that an alien cover specific activity-related costs (all recruitment costs, all in-house legal expenses), and wage deductions to the alien's paycheck as reimbursement for or in anticipation of such costs, regardless of the labor certification activity they cover. As |
