Labor & Employment Law Daily Wrap Up, IMMIGRATION—2d Cir.: Global technology companies did not decrease or avoid duty to pay higher payroll taxes or visa application fees, (Jan 24, 2025)

By Kathleen Kapusta, J.D.

“[A] qui tam plaintiff does not state a reverse false claim if the defendant does not have an obligation—that is, an established duty—to pay the government.”

Three former employees of HCL Technologies Ltd and HCL America, Inc. (HCL), who claimed that the companies defrauded the United States when they applied for and secured visas for foreign employees to work in the United States, were unable to revive their reverse FCA claims on appeal. Affirming the lower court’s dismissal of their claims, the Second Circuit found the employees failed to state a plausible claim that HCL decreased or avoided an established obligation to pay money to the United States in the form of higher payroll taxes or higher visa application fees (U.S. ex rel Billington v. HCL Technologies Ltd., No. 22-1854 (2d Cir. Jan. 23, 2025)).

HCL, which provides information technology services, products, and engineering to clients worldwide, employs foreign workers, primarily from India, in the United States. In order to do so, it applies for and secures H-1B, L-1, and B-1 visas. In their qui tam lawsuit against HCL, the former employees alleged that it evaded the visa regulatory system in two ways.

Alleged violations. First, they alleged, it paid its H-1B visa workers up to 70 percent less than it would pay a similarly situated American hire, in violation of Department of Labor regulations requiring an employer to pay the H-1B employee a wage that is at least equal to the wage paid to American workers for the same work, which deprived the government of payroll tax revenue. And second, they contended, it falsified workers’ roles and qualifications on visa applications to obtain L-1 and B-1 visas for employees whom it intended to perform work requiring an H-1B visa, thereby depriving the federal government of the higher H-1B visa application fees.

Lower court proceedings. Granting HCL’s motion to dismiss, the district court found that at the time of the alleged misconduct, HCL did not have an established obligation to pay higher payroll taxes because it was not paying any wages that supported such taxes. As to the employees’ visa fee-based claim, the court found that HCL’s “obligation to pay the government arose only upon applying for a visa.” Thus, at the time of the alleged misconduct, the only established obligation was payment for the visa applications actually submitted.

Established duty. On appeal, the Second Circuit first observed that the FCA’s reverse false claim provision applies to claims of money owed to the government, rather than payments made by the government. Further, said the court, a qui tam plaintiff does not state a reverse false claim if the defendant does not have an established duty to pay the government. Moreover, said the court, pursuant to its 2024 decision in Miller v. United States ex rel Miller, an “established duty” to “pay or transmit money or property to the Government” must be “one that is already secured or settled” and “a duty to pay is ‘established’ only when it triggers an immediate and self-executing duty to pay.”

Tax-based claim. In support of their claim HCL avoided or decreased its obligation to pay the government payroll taxes, the employees argued that HCL had an obligation under 20 C.F.R. § 655.731(a) to pay its H-1B workers at least the same wage it pays non-visa employees. By paying H-1B workers below this mandated wage, they continued, HCL avoided or decreased its obligation, under 26 U.S.C. § 3111(a), to pay the government the taxes associated with the higher wage.

Agreeing with the district court that HCL did not have an “obligation” under the FCA to pay taxes for wages it never in fact paid, the appeals court pointed out that 20 C.F.R. § 655.731(a), which the employees argued obligates the government to pay H-1B visa employees a certain wage, was not the obligation at issue for purposes of the FCA. Rather, said the court citing Miller, the established duty under the FCA must be “a duty to pay or transmit money or property to the Government.”

Duty arises from IRC. And here, the duty to pay the government arises from the Internal Revenue Code, not the DOL regulation cited by the employees. Specifically, 26 U.S.C. § 3111(a) provides that every employer must pay taxes equal to a percentage of the wages it actually paid to its employees. Rather than alleging that HCL avoided or decreased its obligation to pay the required taxes for the wages it in fact paid its H-1B visa workers, the employees argued that HCL avoided or decreased an obligation to pay taxes for wages it should have, but did not, pay its employees.

Under Section 3111(a), however, “an obligation to pay taxes on the higher wages,” said the court, “would trigger if, and only if, HCL actually paid its employees the higher wage.” Because this never occurred, there was no “immediate and self-executing duty to pay” the higher taxes to the government and the employees’ tax-based claim failed.

Visa fee-based claim. As to the employees’ contention HCL avoided or decreased its obligation to pay higher H-1B visa application fees by fraudulently obtaining cheaper L-1 or B-1 visas instead, the court acknowledged that employers have a duty to pay the appropriate fee for the visa applications they submit. But again the employees did not allege that HCL failed to pay the appropriate fees for the visa applications it submitted or that it somehow obtained H-1B visas by applying for L-1 and B-1 visas. Rather, they claimed HCL fraudulently applied for L-1 and B-1 visas for employees it knew would perform wok requiring H-1B visas and thus it should have applied for H-1B visas and paid the higher application fee associated with those visas.

“However, an obligation to pay higher visa application fees,” said the court, “‘does not exist by the mere fact of a violation’ of immigration laws because that violation does not ‘trigger[] an immediate and self-executing duty to pay’ the government those fees.” Though the court agreed that an employer might face penalties for failing to comply with applicable immigration laws, the employees did not identify any provision in the visa regulatory framework that imposes an affirmative, automatic duty on an employer to submit an H-1B application—and pay the associated fee—at the point in time the employer determines that it requires a foreign worker to come to the United States to perform H-1B work. Because HCL did not have an established duty to pay a fee for visa applications that were never submitted, the court affirmed the dismissal of this claim as well.

The case is No. 22-1854.

Judge: Bianco, J.

Attorneys: Daniel Kotchen (Kotchen & Low) for Ralph Billinton, Michael Aceves, and Sharon Dorman. David L. Schenberg (Ogletree Deakins) for HCL Technologies Ltd. And HCL America, Inc.

Companies: HCL Technologies Ltd.; HCL America, Inc.

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