Department of Labor: 72 FED REG

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Thursday,

May 17, 2007

Part II

Department of LaborEmployment and Training Administration

20 CFR Part 656

Labor Certification for the PermanentEmployment of Aliens in the UnitedStates; Reducing the Incentives andOpportunities for Fraud and Abuse andEnhancing Program Integrity; Final Rule

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27904 Federal Register / Vol. 72, No. 95 / Thursday, May 17, 2007 / Rules and Regulations

DEPARTMENT OF LABOR

Employment and TrainingAdministration

20 CFR Part 656

RIN 1205AB42

Labor Certification for the Permanent

Employment of Aliens in the UnitedStates; Reducing the Incentives andOpportunities for Fraud and Abuse andEnhancing Program Integrity

AGENCY: Employment and TrainingAdministration, Department of Labor.ACTION: Final Rule.

SUMMARY: The Department of Labor(DOL or Department) is amending itsregulations to enhance program integrityand reduce the incentives andopportunities for fraud and abuserelated to the permanent employment ofaliens in the United States.

This Final Rule includes severalmajor provisions. It prohibits thesubstitution of alien beneficiaries onpermanent labor certificationapplications and resulting certifications.The Final Rule provides a 180-dayvalidity period for approved laborcertifications; employers will have 180calendar days within which to file anapproved permanent labor certificationin support of a Form I140 ImmigrantPetition for Alien Worker(Form I140hereafter) with the Department ofHomeland Security (DHS). The ruleprohibits the sale, barter or purchase of

permanent labor certifications andapplications. In addition, this rulerequires employers to pay the costs ofpreparing, filing and obtainingcertification. An employers transfer tothe alien beneficiary of the employerscosts incurred in the labor certificationor application process is strictlyprohibited. The rule makes clear analien may pay his or her own legitimatecosts in the permanent laborcertification process, includingattorneys fees for representation of thealien. The rule also reinforces existinglaw pertaining to the submission of

fraudulent or false information andclarifies current DOL procedures forresponding to incidents of possiblefraud. Finally, the rule establishesprocedures for debarment from thepermanent labor certification program.

Consistent with the proposed rule, theprovisions in this Final Rule apply topermanent labor certificationapplications and approved certificationsfiled under both the Program ElectronicReview Management (PERM) programregulation effective March 28, 2005, andprior regulations implementing the

permanent labor certification program.This rule also clarifies the Departmentsno modifications policy forapplications filed on or after March 28,2005, under the new, streamlined PERMprocess.

DATES: This Final Rule is effective July16, 2007.

FOR FURTHER INFORMATION CONTACT:William L. Carlson, Administrator,Office of Foreign Labor Certification,Employment and TrainingAdministration, U.S. Department ofLabor, 200 Constitution Avenue, NW.,Room C4312, Washington, DC 20210.Telephone: (202) 6933010 (this is nota toll-free number).

Individuals with hearing or speechimpairments may access the telephonenumber above via TTY by calling thetoll-free Federal Information RelayService at (800) 8778339 (this is a toll-free number).

SUPPLEMENTARY INFORMATION

I. Background

The purpose of this Final Rule is toimpose clear limitations on theacquisition and use of permanent laborcertification applications andpermanent labor certifications in orderto reduce incentives and opportunitiesfor fraud and abuse in the permanentlabor certification program. It alsopromulgates key measures to enhancethe integrity of the permanent laborcertification program. This Final Rulecontinues efforts the Departmentinitiated several years ago to construct

a deliberate, coordinated fraudreduction and prevention frameworkwithin the permanent labor certificationprogram. The Department laid thegroundwork for greater integrity andsecurity during the planning andpromulgation of the 2004 Final Rule toimplement the re-engineered PERMsystem. While fraud prevention hasalways been a goal of the Departmentslabor certification programs, ourcontinuing program experience and thatof other Federal agencies hasdemonstrated the need to focus on thespecific opportunities for fraud and

abuse addressed in this rule.A. Statutory Standard and CurrentDepartment of Labor Regulations

Under section 212(a)(5)(A) of theImmigration and Nationality Act (INAor Act) (8 U.S.C. 1182(a)(5)(A)), beforethe Department of Homeland Security(DHS) may approve petition requestsand the Department of State (DOS) mayissue visas and admit certain immigrantaliens to work permanently in theUnited States (U.S.), the Secretary ofLabor (Secretary) must certify to the

Secretary of Homeland Security and theSecretary of State that:

(a) There are not sufficient U.S.workers who are able, willing, qualified,and available at the time of theapplication for a visa and admissioninto the United States and at the placewhere the alien is to perform the work;and

(b) The employment of the alien willnot adversely affect the wages andworking conditions of similarlyemployed U.S. workers.

If the Secretary of Labor, through theEmployment and TrainingAdministration (ETA), is satisfied in hisor her review of a sponsoringemployers application for certificationthat these two requirements have beenmet, he or she so certifies by granting apermanent labor certification. If DOLcannot make both of the above findings,the application for permanent laborcertification is denied. The Departmentof Labors regulation at 20 CFR part 656governs the labor certification processfor the permanent employment ofimmigrant aliens and sets forth theresponsibilities of employers who wishto employ immigrant alienspermanently in the United States.

The INA does not specifically addresssubstitution of aliens in the permanentlabor certification process. Similarly,the Department of Labors regulationsare silent on the question ofsubstitution.

On May 6, 2002, the Departmentpublished a Notice of ProposedRulemaking (NPRM) to streamline the

permanent labor certification program.67 FR 30466 (May 6, 2002). A Final Ruleimplementing the streamlinedpermanent labor certification programthrough revisions to 20 CFR part 656was published on December 27, 2004,and took effect on March 28, 2005. 69FR 77326 (Dec. 27, 2004). The prior 20CFR part 656 (2004) governs processingof permanent labor certificationapplications filed prior to March 28,2005, except where certain provisions ofthis Final Rule will impact suchapplications. Previously filedapplications may be refiled under the

new PERM rule.B. General Immigration ProcessInvolving Permanent LaborCertifications

To obtain permanent alien workers,U.S. employers generally must engage ina multi-step process that involves DOLand DHS and, in some instances, DOS.The INA classifies employment-based(EB) immigrant workers into categories,e.g., EB2 and EB3, based on thegeneral job requirements and theperceived benefit to American society.



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27905Federal Register / Vol. 72, No. 95 / Thursday, May 17, 2007 / Rules and Regulations

1The 1991 Interim Final Rule included aprovision prohibiting substitution. That provisionwas overturned by the U.S. Court of Appeals for theD.C. Circuit on Administrative Procedure Actprocedural grounds. Kooritzkyv. Reich, 17 F.3d1509 (D.C. Cir. 1994). DOL addressed the courtsconcern through publication of the NPRM for noticeand comment on February 13, 2006, considerationof comments received and development of thisFinal Rule. 71 FR 7656 (Feb. 13, 2006). It is of nosmall significance that the plaintiff in that suit, anattorney, was later convicted for the criminal saleof fraudulent labor certifications used forsubstitution. U.S. v. Kooritzky, No. 02502A (E.D.Va. 2003).

U.S. employers must demonstrate thatthe requested job requirements, and insome cases the alien, fit into one ofthese classifications. The first step inthe process for the EB2 and EB3classifications, further described below,generally begins with the U.S. employerfiling a labor certification applicationwith DOL in accordance with 20 CFR

part 656. The U.S. employer mustdemonstrate to DOL, through a test ofthe labor market, that there are no U.S.workers able, willing, qualified, andavailable at the time of the applicationfor a visa and admission to the UnitedStates and at the place where the alienis to perform the work. The employermust also demonstrate that theemployment of the alien will notadversely affect the wages and workingconditions of similarly employed U.S.workers. Following review of thepermanent labor certificationapplication, DOL will either certify or

deny the application.The Immigrant Petition for AlienWorker(Form I140) is a petition filedwith the United States Citizenship andImmigration Services (USCIS), withinDHS, by a U.S. employer for aprospective permanent alien employee.Most Form I140 petitions filed undersection 203(b)(2) and (3) of the Act, theEB2 and EB3 classifications, must beaccompanied by an approved laborcertification issued by DOL. DHS hasestablished procedures for filing FormI140 petitions under 8 CFR 204.5.

DHS reviews the approved laborcertification in conjunction with the

Form I140 petition and othersupporting documents to evaluatewhether the position being offered tothe alien named in the petition is thesame as the position specified on thelabor certification and whether theemployment qualifies for the immigrantclassification requested by theemployer. In addition, DHS evaluatesthe aliens education, training, and workexperience to determine whether theparticular alien meets the jobrequirements specified on the laborcertification. The approved laborcertification is also used to establish the

priority date for which an immigrantvisa will be made available to the alien,based on the date the labor certificationapplication was originally filed.

C. Current ETA Practices InvolvingPermanent Labor Certifications

Although not mentioned in 20 CFRpart 656, ETA has for years informallyallowed employers to substitute an aliennamed on a pending or approved laborcertification with another prospectivealien employee. Labor certificationsubstitution has occurred either while

the permanent labor certificationapplication is pending at DOL orbyDOLs delegation to DHSwhile a FormI140 petition, filed with an approvedlabor certification, is pending with DHS.Historically, this substitution practicewas permitted as an accommodation toU.S. employers due to the length of timeit took to obtain a permanent labor

certification or receive approval of theForm I140 petition.

Currently, the regulations do not setany validity period on a permanentlabor certification and, thus, permanentlabor certifications are validindefinitely. Also, DOL regulations donot address payments related to thepermanent labor certification programor debarment authority. In this FinalRule, the Department addressesproblems that have arisen related tosubstitution, lack of a validity period forcertifications, and financial transactionsrelated to the permanent labor

certification program.D. Issues Arising From Current Practices

For more than 15 years, theDepartment has expressed concern thatvarious immigration practices,including substitution, were subject to ahigh degree of fraud and abuse. See, e.g.,Interim Final Rule, 56 FR 54920(October 23, 1991).1 This concern washeightened by a number of recentcriminal prosecutions by theDepartment of Justice (DOJ) as well asrecommendations from the Departmentof Justice and the Department of LaborsOffice of Inspector General (OIG), and

public comments concerning fraudreceived in response to the May 6, 2002,NPRM on PERM. See, e.g., 69 FR at77328, 77329, 77363, and 77364 (Dec.27, 2004).

The Departments review of recentprosecutions by DOJ, in particular,revealed that the ability to substitutealien beneficiaries has turned laborcertifications into commodities whichcan be sold by unscrupulous employers,attorneys, or agents to those seeking agreen card. Similarly, the ability tosell labor certifications has been greatlyenhanced by their current open-endedvalidity, providing a lengthy period

during which a certification may bemarketed. In many of these applications,the job offer was fictitious. In others, thejob in question existed but was nevertruly open to U.S. workers. Rather, thejob was steered to a specific alien inreturn for a substantial fee orkickback. The Federal Governmenthas prosecuted a number of cases

resulting from employers, agents, orattorneys seeking to fraudulently profitfrom the substitution of aliens onapproved labor certifications andapplications. One attorney filedapproximately 2,700 fraudulentapplications with DOL for fees of up to$20,000 per application. Many of theseapplications were filed for the solepurpose of later being sold to aliens whowould be substituted for named

beneficiaries on the approved laborcertifications. See U.S. v. Kooritzky, No.02502A (E.D. Va. 2003). Additionalprosecutions have also involved the sale

of fraudulent applications orcertifications. See, e.g., U.S. v.Ivanchukov, et al., No. 04421 (E.D. Va.2005); U.S. v. Mir, No. 8:03CR00156AWALL (D. Md. 2003); U.S. v.Fredman, et al., No. WMN05198 (D.Md.); U.S. v. Lee, No. 03947M (E.D.Va.); U.S. v. Mederos, No. 04314A(E.D. Va.); U.S. v. Yum (E.D. Va. 2006);U.S. v. Mandalapa, No. 205NJ03117PS (D. N.J. 2006); U.S. v. Heguman, No.CR 041635(A)RSWL (C.D. Cal. 2007).Our program experience confirms thatsuch fraudulent activity adds to the costof foreign labor certification programsfor example, resources spent processing

fraudulent applications, anticipatingand combating unscrupulous conduct,and assisting debarments orprosecutions after the fact.

The Final Rule implementing thestreamlined permanent laborcertification program also discussedDOLs and others concerns about fraudin the program and the steps theDepartment would be taking tominimize the filing of fraudulent ornon-meritorious applications. 69 FR at77328, 77329, and 77363 (Dec. 27,2004). As implemented, the basic laborcertification process under the new

PERM system incorporates frauddetection measures targeting areas thathave historically shown vulnerability.These measures include system andmanual checks in key areas, as well asthe use of auditing triggers andtechniques, both targeted and random,which can be adjusted as appropriate tomaintain security and integrity in theprocess.

Personal Identification Numbers(PINs) and passwords for registrationinto the automated filing system areassigned to accounts issued to



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sponsoring employers, who may thencreate sub-accounts for attorneys oragents who represent the employer. Theinitial stages of registration andapplication include system checks toverify the employer-applicant is a bonafide business entity. Once DOLs initialreview of a filed application shows it to

be technically acceptable for processing,

the application transfers to a substantivereview queue, where it may be selectedfor audit either randomly or based onspecific criteria that tie closely toprogram requirements. Staff at ETAsNational Processing Centers, wherePERM applications are processed, alsoconfirm information directly withemployers, for example, to ensure eachemployer is aware an application has

been filed on its behalf and is, in fact,sponsoring the alien named on theapplication.

While these measures are targetedbased on our program experience, they

focus largely on discrete activities(employer verification, sponsorship,etc.) or on program requirements asreflected in questions throughout theapplication, and do not address broaderlabor certification policies historicallyof concern to the Department. Forexample, in the Final Rule to implementthe PERM program, the Departmentnoted the practice of allowing thesubstitution of alien beneficiaries mayprovide an incentive for fraudulentapplications to be filed. 69 FR at 77363(Dec. 27, 2004). The Department alsoconcluded in that Final Rule that theemerging black market for purchase

and sale of approved labor certificationsis not consistent with the purpose of thelabor certification statute at section212(a)(5)(A) of the INA. While DOL wasnot able to address many of these fraudissues in the PERM Final Rule becausethey arguably went beyond the scope ofthe proposals contained in the PERMNPRM, the Department clearly indicatedit would be exploring regulatorysolutions to address these issues. 69 FRat 77328, 77329, and 77363 (Dec. 27,2004).

Similarly, the Department determinedthat additional regulatory action was

required to reinforce and clarify coreprogram components, both to strengthenfraud prevention and enhance programintegrity. For example, a prohibition onmodifications to applications was anoriginal assumption of the PERMprogram and having such a clear,enforceable prohibition is critical to itslong-term efficiency and effectiveness.A prohibition against the transfer oflabor certification costs from sponsoringemployers to alien beneficiaries keepslegitimate business costs with theemployer, minimizes improper financial

involvement by aliens in the laborcertification process, and strengthensthe enforceability of the bona fide jobopportunity requirement.

Accordingly, on February 13, 2006,the Department published in theFederal Register a Notice of ProposedRulemaking to amend its regulationsgoverning the permanent labor

certification process to curb fraud andabuse and strengthen program integrity.71 FR 7656. As proposed, the ruleprohibited substitution of aliens notoriginally named on applications forpermanent labor certification; limitedthe period of validity of a permanentlabor certification to 45 calendar days;prohibited certain financial transactionsor activities related to permanent laborcertifications; and took other steps toenhance program integrity and reduceor avert fraud.

This Final Rule builds on thefoundation laid in the 2004 Final Ruleimplementing the streamlinedpermanent program and follows throughon the strong commitment reflected inthe NPRM for this rulemaking,culminating a multi-year effort toenhance integrity and fraud preventionmechanisms in the permanent laborcertification program.

To assist compliance and enforcementunder this rule, the Department isreviewing available resources todetermine its ability to establish a newtoll-free telephone number, or todevelop other means, to receive reportsof potential violations. Calls would bescreened by DOL staff, who would refer

calls or inquiries to appropriate agencieswithin or outside the Department.

II. Overview of the Regulation

In order to protect the integrity of thepermanent labor certification program,reduce the incentives for fraud andabuse, and comply with theDepartments statutory obligation toprotect the wages and workingconditions of U.S. workers, theDepartment proposed in the NPRM anumber of regulatory changes. As statedin the NPRM, the revisions wereproposed in part in response to

concerns raised historically bystakeholder agencies and individualprogram users. They also responded tothe numerous substantive commentsreceived to the May 6, 2002 NPRM. Atits essence, each change was motivated

by our program experience and desireand responsibility under the authorizingstatute to restore and maintain theintegrity of the labor market test. TheDepartments regulations at 20 CFR part656 establish the fact-finding processdesigned to develop informationsufficient to support the Secretary of

Labors determination, required underthe statute, of the availability of oradverse impact to U.S. workers. Thelabor market test forms the basis fornotice to U.S. workers of the jobvacancy, for the recruitment processthrough which U.S. workers have theopportunity to apply and be consideredfor each job, and for employer

attestations related to key terms andconditions of employment. While weremain sensitive to concerns raised byemployers and others over the impact ofthese changes, we nonetheless haveconcluded, after careful review ofcomments on each proposal, that theidentification and deterrence of fraudand the broader integrity of the programrequire a strong, comprehensiveapproach to which these regulatoryreforms are critical. Accordingly, in thisFinal Rule the Department amends part656 to add fraud prevention andredressive measures in the key areas

identified in the proposed rule, asfollows.

SubstitutionConsistent with theproposed rule, this Final Rule adds anew 656.11 to prohibit the substitutionof alien beneficiaries as of the effectivedate of the Final Rule. This prohibitionwill apply to all pending permanentlabor certification applications and toapproved permanent laborcertifications, whether the applicationwas filed under the provisions of 20CFR part 656 in effect before March 28,2005, or on or after March 28, 2005.Additionally, as proposed, the Final

Rule revises 656.30(c) to provide thata certification resulting from anapplication filed under 20 CFR part 656in effect before March 28, 2005, or onor after March 28, 2005, is only valid forthe alien named on the originalpermanent labor certificationapplication. These regulatory changesdo not affect substitutions approved bythe Department or DHS under eitherregulation prior to this Final Ruleseffective date. They also do not affectsubstitution requests in progress as ofthis rules effective date. Due to theconsiderable evidence of past and

continuing fraud in the permanent laborcertification process, DOL through thisFinal Rule, among other measures, iseliminating the practice of substitution.The Department will work with theDepartments of Justice and HomelandSecurity to explore appropriatecircumstances under which substitutioncould be reinstated. We anticipate thatthere may come a time when all affectedagencies are satisfied that there aresufficient anti-fraud protections toalleviate the concerns motivating thisrule.



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Modifications to applicationsThisFinal Rule finalizes with minor changesthe provision in the proposed ruleprohibiting modifications to permanentlabor certification applications oncesuch applications are filed with theDepartment. The Department hasimplemented technological changes inthe PERM program to alert applicants to

technical grounds for deniability, thuseliminating the need for manymodifications. Section 656.11(b)clarifies that requests for modificationsto an application, where the applicationwas filed after this Final Rules effectivedate, will not be accepted. To comportwith this clarification while ensuringdue process, the Final Rule revises 656.24(g) to more precisely definewhat evidence may be submitted withan employers request forreconsideration.

Validity periodAlthough theDepartment had originally proposed

permanent labor certifications be filedwith DHS within 45 calendar days, thisFinal Rule extends that period to 180calendar days. Accordingly, allpermanent labor certifications approvedon or after the effective date of this FinalRule will expire 180 calendar days aftercertification, whether the originalapplication was filed under 20 CFR part656 in effect prior to or after March 28,2005, unless filed prior to expiration insupport of a Form I140 petition withDHS. Likewise, all certificationsapproved prior to this Final Ruleseffective date will expire 180 calendardays after the Final Rules effective date

unless filed in support of a Form I140petition with DHS prior to theexpiration date.

Ban on sale, barter, purchase, andcertain paymentsThis Final Ruleprohibits the sale, barter, and purchaseof applications and approved laborcertifications, as well as certainpayments to employers in compensationor reimbursement for the employerscosts incurred to obtain laborcertification. This ban will apply to allsuch transactions on or after theeffective date of This Final Ruleregardless of whether the labor

certification application involved wasfiled under 20 CFR part 656 in effectbefore March 28, 2005, or on or afterMarch 28, 2005. In consideration ofcomments, the Final Rule moreprecisely describes the payments beingprohibited. Proposed 656.12(b), now 656.12(b) and (c), has been revised toreflect this approach and definitionshave been added to 656.3.

Debarment and program integrityFinally, the Final Rule institutes severalenforcement mechanisms as describedin the proposed rule, with revisions to

clarify procedures and addresscomments received in response to theNPRM. On or after the effective date ofthis Final Rule, the Department maydebar an employer, attorney or agent

based upon certain enumerated actionssuch as fraud, willful provision of falsestatements, or a pattern or practice ofnoncompliance with PERM

requirements, regardless of whether thelabor certification application involvedwas filed under the prior or currentregulation. In addition, other provisionsrelated to all applications filed under 20CFR part 656 in effect before March 28,2005, or on or after March 28, 2005,highlight existing law pertaining tosubmission of fraudulent or falseinformation and clarify our proceduresfor responding to possible fraud.

As proposed, this Final Rule extendsfrom 90 to 180 days the period duringwhich the Department may suspendprocessing of applications under

criminal investigation. In addition, inresponse to comments requesting amateriality standard for the variousdebarment provisions, the Final Ruleadds an intent requirement (willful)to the false information section; to beactionable, the employer must willfullyprovide false or inaccurate informationto the Department. The Final Rule alsoraises the standard for debarment basedon failure to comply with the terms ofForms ETA 9089 or 750, failure tocomply with the permanent laborcertification programs audit process, orfailure to comply with the programssupervised recruitment requirements, to

require there must be a pattern orpractice of noncompliance in each case.These changes in the standard fordebarment at 656.31(f) work in tandemwith the revision to 656.26(a)(1). Thenew 656.26(a)(1) expands the existingprovision for a right to review theDepartments denial of an application orrevocation of a certification, toencompass a right to review of adebarment action. The request forreview would be made to, and inappropriate cases a concomitant hearingwould be held by, the Board of AlienLabor Certification Appeals (BALCA).

III. Discussion of Comments onProposed Rule

The Department received a total of489 comments from attorneys,educational institutions, tradeassociations, individuals, and

businesses. Many of the comments wereduplicative in nature and have beengrouped together for discussionpurposes. Although most of thecommenters were critical of one or moreof the proposed changes, they alsosupported the Departments efforts to

deter fraud in the permanent laborcertification program. Severalcommenters suggested alternatives forimproving the fraud rule, while somesuggested abandonment of the proposedrule entirely.

A. Prohibition of Substitution or Changeto the Identity of Alien Beneficiaries on

Permanent Labor Certifications andApplications

The proposed rule prohibited thesubstitution of alien beneficiaries onpending applications for permanentlabor certification and on approvedlabor certifications. The comments wereceived on the prohibition ofsubstitution raised concerns in anumber of key areas: the Departmentsauthority to make the rule change; thenexus between the proposed ban andthe incidence and types of fraud thathave occurred; the Departmentspremise that substitution is no longerneeded, both because the new,automated system has significantlyreduced processing time and becausethe backlog of permanent laborcertification applications filed prior toMarch 28, 2005, will be eliminated bySeptember 30, 2007; the application ofthe ban to all pending applications andapproved certifications; and thehardships that employers would sufferand costs they would incur as a resultof such a ban.

We address the comments bearing oneach of these issues below. However,after thoughtfully reviewing anddeliberating over the concerns raised,

we continue to find that the publicbenefit of eliminating substitution onpermanent labor certifications andapplications outweighs any potentialdisadvantages to individual programusers. Consequently, as originallyproposed in the NPRM, the Final Ruleincludes a new 656.11 providing that,as of the effective date of the Final Rule,substitution of alien beneficiaries will

be prohibited: (1) On all pendingpermanent labor certificationapplications; and (2) on certifications,regardless of whether the applicationwas filed under 20 CFR part 656 in

effect before or on or after March 28,2005. Likewise, once this Final Ruletakes effect, the revised 656.30(c)makes a certification valid only for thealien named on the original application.

As explained in the NPRM, thisregulatory change has no retroactiveeffect on substitutions approved by theDepartment or DHS prior to this FinalRules effective date. As made implicit

by the new 656.11(a), this Final Rulealso has no retroactive effect onsubstitution requests in progress(submitted) prior to this rule taking



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effect. These and the other regulatorychanges promulgated in this Final Rulemodify the statement in the preamble tothe December 27, 2004, PERM FinalRule that applications filed before thatFinal Rules effective date wouldcontinue to be processed and governed

by the then-current regulation. 69 FR77326 (Dec. 27, 2004).

1. Statutory Authority

Several commenters questioned theDepartments authority under the INA toeliminate substitution of aliens oncertifications and applications.

Statutory authority relative toqualifications and identity of alienMany commenters opposed the ban onsubstitution as being overbroad andoverreaching. Commenters referred tothe plain language of the authorizingstatute and opposed the elimination ofsubstitution on grounds that DOLsjurisdiction, based on 8 U.S.C.1182(a)(5), stops with determiningworker unavailability and adverseimpact and does not extend to activitiesrelated to worker identity orqualifications. Commenters stated thatthe authority to scrutinize thequalifications of the alien named on thepetition rests solely with USCIS.

More specifically, commentersquestioned the Departments authorityto join the labor certification applicationto a specific alien, asserting laborcertifications are related to the jobopportunity, not the employee. Theyargued that the identity of the specificalien employee, whether the original

beneficiary or a substituted beneficiary,is not relevant to a good faith labormarket test. One commenter stated thatthe elimination of substitution,requiring a second labor market test forthe position, contravenes what it

believes is the legislative intent that thelabor certification process require only asingle labor market test.

With respect to the statutoryrequirement that U.S. workers beunavailable, one commenter stated thatthe identity of the alien is not relevantto the labor market test, as long as he orshe qualified for the job opportunity

when the labor certification applicationwas filed. With respect to therequirement of no adverse impact, thecommenter stated that the aliensidentity is also not relevant as long asthe qualified alien is offered theappropriate wages and workingconditions. The commenter raisedconcern that this rule would refocuslabor certification from the jobopportunity to the identity of thesponsored alien, and would do sowithout statutory change, evidence offraud, or analysis of the increased costs

to the employer. In fact, this commenterstated that given the automated, largelyattestation-based nature of PERM, DOLis clearly unprepared and lacking inresources to evaluate evidence bearingon whether the alien is qualified for thejob.

The Departments authority toregulate and ban the substitution of

aliens on labor certifications andapplications is clear. The INA treatseach alien individually and, foremployment-based immigrationrequiring labor certification, makesevery alien inadmissible, absent theSecretary of Labors determination onU.S. worker availability and adverseimpact. The trigger for such adetermination has always been, at itscore, the existence of a vacancy that anemployer wishes to fill with an alien,and the burden of proof is always uponthe petitioning employer to overcomethe presumption of the inadmissibility

of an individual intended immigrantemployee through a test of the labormarket.

The statute itself could not be clearerthat the labor certification process isalien specific. In defining theDepartments role in the admission of analien for employment-based permanentresidence, INA section 212(a)(5)(i) tiesthe required certification to the placewhere the (emphasis added) alien is toperform such skilled or unskilledlabor[,] and the necessity of certifyingthat the employment ofsuch (emphasisadded) alien will not adversely affect

the wages * * *. The plain language ofthese provisions (i.e., the use of termssuch as the alien and such alien) ismeant to focus not on the process butsolely on its use to admit one, specificalien.

It is this Departments responsibilityto judge how and under whatcircumstances a labor marketdetermination should be made, andwhat constitutes the employers actualminimum requirements for performanceof the job. It is appropriate andconsistent with the broader statutoryand programmatic intent to apply these

requirements any time a position that isthe subject of a labor certificationapplication is or becomes vacant,regardless of whether the applicationcovering it was previously in processand for how long. The labor marketchanges rapidly, and it is consistentwith the Departments obligation toprotect the jobs, wages and workingconditions of U.S. workers to requirethat there be another labor market testwhen the job opportunity effectivelychanges through the unavailability ofthe original alien worker.

The Departments regulationsauthorize it to closely review theinformation provided on the applicationwith respect to the named alien. Ourauthority to examine the statedqualifications of the alien named on theapplication also extends to ourdetermination of whether an employerhas accurately stated the minimum

qualifications necessary to perform thejob, or has inflated or misstated jobrequirements. 56 FR 54920 (Oct. 23,1991); see 20 CFR 656.17(i).

Nevertheless, the Department doesnot undertake in this Final Rule todetermine the visa eligibility ofindividual aliens. This rule governs theprocessing of labor certificationapplications, the validity of approvedcertifications, and other Department ofLabor activities implementing relevantINA provisions and 20 CFR part 656; itdoes not speak to activities by theDepartments of Homeland Security or

State conducted under their respectiveauthorities and jurisdiction. Further, theDepartments focus is not on theidentity of the individual alien but onthe employers failure to conduct asecond labor market test for availableU.S. workers when the original alien

beneficiary becomes unavailable and,subsequently, when an employer seekssubstitution. As stated in the NPRM, ifthe original alien beneficiary is nolonger available, then the employermust use some means to fill that jobopportunity. Clearly, the employer usedsome recruitment tool to find the newforeign worker for that newly opened

job opportunity. Prohibiting substitutionwill ensure the employer again makesthe reopened employment opportunityavailable to U.S. workers. In the eventanother alien is again the only qualifiedperson available, then it is consistentwith this programs purpose and thestatutes plain language to require thatthe employer file a new applicationreflecting the new recruitmentundertaken.

The Medellin decisionA number ofcommenters cited the decision inMedellin v. Bustos, 854 F.2d 795 (5thCir. 1988) in support of the argument

that the Department lacks authority toprohibit substitution. The commentersargue that in Medellin, the Fifth Circuitheld that the Departmentsadministrative decision (based onoperational guidance to program staff) torevoke a permanent labor certification

based on the employers substitution ofanother alien in place of the namedalien more than six months after thecertification was granted was not inaccordance with applicable law. Thecommenters further argued that limitinga labor certification to the alien for



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whom the certification was granted rancontrary to both the INA provisions(now at INA section 212(a)(5)) statingthe Secretary of Labors authority todetermine worker availability andadverse impact, and the Department ofLabors own regulations, whichprovided that a labor certification wasvalid indefinitely, hence disconnecting

validity and any time limitations.We carefully considered the Fifth

Circuits opinion in Medellin prior tothe issuance of the NPRM andconcluded that the dictum relied upon

by commenters in the decision was notso compelling as to overcome the strongargument, based on the Departmentsauthority and experience, that supportsthe elimination of substitution. We havereviewed that matter again as a result ofcomments and reach the sameconclusion for a number of reasons.

First, the ultimate basis for theMedellin decision was an administrativelaw issue not relevant to thisrulemaking. Medellin involved achallenge to provisions in an ETATechnical Assistance Guide (TAG) thatpermitted the substitution of an alien onan approved labor certification only forthe first six months after issuance. Asthe Medellin court correctly noted, theTAG was not published using noticeand comment rulemaking procedures.Further, the six-month limitation wasinconsistent with the then regulation at20 CFR 656.30(a) that made laborcertifications valid indefinitely. Thisrulemaking directly addresses theadministrative law problem identified

in Medellinby clarifying, after notice-and-public comment rulemaking, that alabor certification is valid only for thealien who was the beneficiary of theoriginal application and only for alimited time, 180 days.

The discussion in the Medellindecision about the relativeresponsibilities of DOL and INS in thelabor certification process is dictum andclearly is not the legal grounds for thecourts decision. Further, the reasoningin that dictum is not compelling andreflects an overly narrow view of theDepartments role in the immigration

process. Under the INA, the Departmentis responsible for requiring a labormarket test that is the statutoryprerequisite to the granting of a laborcertification. Banning substitutionenhances protections for U.S. workers

by offering U.S. workers another chancewhen a job that was the subject of alabor certification once again becomesavailable through the departure of thealien employee.

Section 212(a)(5) of the INA makes aforeign worker inadmissible unless, asone condition precedent, the

Department determines there is no able,willing, and qualified domestic workeravailable to fill the position for whichthe foreign workers admission issought. Judicial interpretation of theword willing led to the creation of theprocess that has been in place since1978, whereby the certification approvalis predicated on an employers

demonstrated unsuccessful efforts torecruit a domestic worker. SeeProduction Tool Corporation v.Employment and TrainingAdministration, 688 F. 2d 1161 (7th Cir.1982). The position that the jobopportunity for which certification is

being sought must be a job that adomestic worker can actually fill has

been affirmed by two appellate courtssubsequent to the Medellin decision.Bulk Farms v. Martin, 963 F. 2d 1286(9th Cir. 1992); Hallv. McLaughlin, 864F. 2d 868 (D.C. Cir. 1989).

Given these considerations, it is

perfectly reasonable for the Departmentto require the employer to conduct anew test of the labor market, and file anew labor certification application,every time the job opportunity becomesvacant. The Medellin litigation simplydid not take place in a context thatallowed the Departments concernsregarding the new test of the labormarket to be adequately addressed.

Relationship to DHS regulationsOnecommenter supported the ban onsubstitution but expressed concern thatthe impact of the change may be quitelimited until DHS adopts correspondingregulations to prohibit the substitution

of aliens. Another commenter arguedthat the public should not be placed inthe position of dealing with competingand possibly inconsistent regulationsissued by different agencies andsuggested that DOL should withdraw itsproposal until DHS signals itsequivalent concern.

DOL disagrees that there is alikelihood of competing or inconsistentregulations between DOL and DHS. NoDHS regulations address or authorizesubstitution of alien beneficiaries onlabor certifications. Rather, at present,DHS permits substitution on permanent

labor certifications through a delegationof authority from DOL. See March 7,1996 Memorandum of Understanding

between the Immigration andNaturalization Service (INS) andEmployment and TrainingAdministration (signed by Louis D.Crocetti, Jr., Associate Commissioner,Examinations, and Raymond Uhalde,Deputy Assistant Secretary forEmployment and Training). INS (theportion of that agency that providedimmigration benefits) later became U.S.Citizenship and Immigration Services

(USCIS) at the Department of HomelandSecurity. Pursuant to that 1996 MOU,when substitution is requested, DHSrequires employers to submit a new(employer-completed but not processed)DOL permanent labor certificationapplication form with the name of thesubstituted alien, along with theapproved labor certification in the name

of the original alien beneficiary. SeeUSCIS Adjudicators Field Manual, Sec.22.2(b)(6) (Sept. 12, 2006). This FinalRule alters the current practice byproviding that labor certifications, onceapproved, are valid only for the aliennamed in the original application andthat substitution of alien names on thecertification is prohibited. DOL andDHS have agreed that DOL will rescindthe delegation of authority contained inthe 1996 MOU consistent with the termsof this Final Rule and effective on thesame date as this Final Rule. Becausesubstitution of aliens on labor

certifications has occurred pursuant toDOL authority, regulatory action byDHS is not necessary to implement atermination of its delegated authoritywith respect to DOL permanent laborcertifications.

Thus, following the effective date ofthis rule, employers will face aconsistent approach to laborcertifications: Substitution of the alien

beneficiary on a permanent laborcertification application or on theresulting certification is prohibited. Asreflected throughout this Final Rule, theDepartment has determined that this

prohibition on substitution is consistentwith its statutory responsibilities and isnecessary to achieve importantobjectives. DOL is responsible foradministering the labor certificationprocess and is authorized andaccountable for improvements to theprogram, independent of employment-

based immigration programs overseenby other Federal agencies. Therefore,although we have closely coordinatedwith DHS, DOL OIG, DOJ, and otherappropriate agencies in this rulemakingand other fraud prevention efforts, DOLhas determined, in light of the evidence

of fraud and the continued concernsabout fraud and program integrity raisedby many sources, and the Departmentsstatutory responsibility to U.S. workers,that it is appropriate to issue thisregulation governing the part of theemployment-based immigration processfor which we are responsible. TheDepartment has authority to administer,enforce, and reform programs under itsjurisdiction, including to regulate themeaning and nature of a permanentlabor certification issued under 20 CFRpart 656. Nothing in this Final Rule in



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any fashion interferes with DHSauthority or its ability to address fraudissues through a rulemaking process ofits own.

Entitlement to substitutionManycommenters asserted that since thepractice of substitution has beenpermitted by DOL for several decades,the statute and regulations provide

entitlement to substitution. Onecommenter asserted that theDepartment, under its currentregulations at 20 CFR 656.30(c)(2),effectively provides that the laborcertification application can be valid forany qualified worker, which thecommenter interpreted to include asubstituted worker. 20 CFR 656.30(c)(2).Another commenter opined that theabsence of statutory entitlement tosubstitution is irrelevant to the clearvalue of substitution, which in its viewfar outweighs the perceived or potential

benefits from reducing incentives for

fraud.The Department disagrees with thesecomments. While substitution has beena long-standing practice at theDepartment and by delegation to DHS,the statutory framework to allow thepermanent admission of foreignnationals to perform work wasdeliberately protective of U.S. workersand contains nothing approaching anentitlement to substitution. It isconsistent with the statutespresumption of alien inadmissibilitythat admissibility must be demonstrated

by each employer for each alien and thatthe statute does not provide for

substitution of individual aliens onlabor certifications or applications. Thisregulatory action is also consistent withthe Congressional intent to grant theSecretary of Labor broad discretion inimplementation of the permanent laborcertification program. Nor is itsurprising that the practice ofsubstitution has not been authorized oraddressed in DOLs regulations.Substitution has been permitted simplyas a procedural accommodation toemployer-applicants. The Departmentrecognizes that this accommodation hashad a distinct benefit to employers and

applicants in allowing them to retain anearlier priority date and apply theresults of a completed labor market test.However, as discussed later in thisPreamble, the equities do not supportretention of the earlier priority date.Accordingly, in light of the evidencethat substitution is an importantcontributor to fraud in the laborcertification program and of DOLsstatutory interest in protecting U.S.workers by reestablishing workerunavailability whenever a position onceagain becomes vacant, the demonstrated

black market in labor certifications,and the significant number ofprosecutions for fraudulent activityrelated to the program, we conclude the

benefits to elimination outweigh thepotential disadvantages. As statedpreviously, the Department willcontinue to work with other Federalagencies with an interest in the

employment-based immigration systemto explore, under appropriatecircumstances, potential alternatives tothe current practice.

2. Evidence of Fraud

Several commenters mentioned thatthe Department has not providedevidence of or statistics on widespreadlabor certification fraud or abuse andneeds to consider the benefits ofsubstitution against relatively fewabuses. One commenter opined thatelimination is appropriate only when apolicy is commonly or largely misused.It stated the burden is on theDepartment to show the connection

between fraud and substitution, and toestablish that its elimination will notimpede legitimate business practices.

Some commenters questioned theeffectiveness of eliminating substitution;they were concerned the rule does nottarget the most common sources ofabuse or deter persons with intent todefraud. One commenter suggested thatpersons intending to engage in theseabuses will find the substitutionprohibition does not provide asignificant obstacle to their endeavors. Itstated such persons will remain free to

file fraudulent applications naming theintended beneficiary and thatsubstitution elimination will onlysucceed in moving the initiation of thefraudulent transaction with the foreignnational back to a point in time beforethe filing of the application. Thecommenter asserted it is highlyquestionable whether such a minorachievement justifies the harm done tolegitimate employers by the prohibitionof substitution. Some commentersclaimed the substitution prohibitionwill do little to eliminate the filing ofapplications without the knowledge of

the employer, and the filing ofapplications by employers who are paidto engage in a fraudulent scheme andwho have no intention of filling the jobopportunity described in theapplication. Citing U.S. v. Kooritzky,No. 02502A (E.D. Va. 2003), theyobserved those who are determined tocommit fraud will find a way to commitfraud.

The NPRM detailed the reasons forour proposal to eliminate the practice ofsubstitution. Our experience with thefailures of this practice is longstanding

and shared by other Federal agencies.The Department disagrees thateliminating substitution contributesonly a minor achievement toaddressing the realm of abuses overwhich the Department has control. Thefraud cases prosecuted even within therecent past indicate a significantnumber of instances where substitution

played a role in fraudulent activity inobtaining an immigrant benefit. See,e.g., U.S. v. Yum (E.D. Va. 2006); U.S.v. Mandalapa, No. 205NJ03117PS(D.N.J. 2006).

The Department continues to believe,based on the activity in these and othercases, that fraudulent substitution is acore contributor to the marketability oflabor certifications because it is only ifone can substitute that one can benefitfrom a certified application naminganother individual. This marketabilityresults in the use of labor certificationsfor fraudulent purposesby aliens and

employers with no intent to have alegitimate employment relationship.We agree there are numerous sources

of fraud in employment-basedimmigration programs government-wide, and individuals intent oncommitting fraud and abusing thesystem may still find a way to do so.However, the existence of other types offraud, separate from that generated bythe practice of substitution, does notobviate the need to address thedocumented fraud related to aliensubstitution. As described earlier, theDepartment has instituted specificchecks and balances in the PERM

process to address and prevent the filingof applications without the employersknowledge. For example, the NationalProcessing Centers contact the employerdirectly to confirm it is aware of theapplication and is sponsoring the alien,and the ETA Form 9089 requiresdistinct contact information for theemployer and the attorney or agentfiling the application. The substitutionprohibition enhances and supplementsexisting anti-fraud and programintegrity measures.

Alternatives to a regulatory ban onsubstitution, including limiting or

tailoring the option to substituteOnecommenter asserted the elimination ofsubstitution in no way facilitates theidentification of fraudulent laborcertification applications, and this ruleinstead takes a shotgun approach atthe expense of legitimate program users.The comment stated the goal of reducedfraud is better achieved by heightenedenforcement measures, which it statesthe Department has already put in placein the PERM program. The commenteralso pointed to traditional lawenforcement measures, like the



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discernment of patterns in groups ofapplications filed by a given employeror attorney, to ferret out fraud andabuse. One commenter argued existingregulations provide a sufficient basis toprosecute employers, employees, andattorneys alike who engage infraudulent activity associated with thepermanent labor certification process.

Others also suggested there is no needto ban substitution because of theadditional provisions prohibiting thesale, barter, or purchase of laborcertifications at 656.12; the safeguardsalready in place at the BacklogProcessing Centers to confirm the bonafide nature of applications; and thePERM programs strict employerregistration requirements. Anothercommenter stated it is concerned aboutthe elimination of substitution in smalltown or rural areas where employershave great difficulty finding qualifiedengineers, and requested the

Department relax its requirements forrural or small town situations.One commenter suggested that in

order to limit occurrences of fraud, DOLshould limit the prohibition onsubstitutions to filings made undersection 245(i) of the INA. As analternative, the commenter suggestedthe establishment of an exception to therule for large corporations. Thecommenter also suggested theDepartment could establish appropriatecriteria to allow employers who, forexample, have a demonstrated record offiling appropriate labor certificationapplications to use substitutions.

The Department disagrees with thesecomments. The heightened enforcementmeasures in the PERM program aredesigned to catch fraud in processand do not address fraudulent activitythat transpires thereafter, as the newsubstitution policy will. Further, theprohibition on substitution is notdesigned as a fraud detectionmechanism, but rather as one of severalprotective measures to altogetherprevent fraud related to this activity bypreventing the commodification of laborcertifications. The prohibition will bemore effective because it will cover

applications filed under 20 CFR part656 in effect before and after March 28,2005. Further, while we agree that otherfraud prevention and detection methodsmay be available, the effectiveness ofthose other methods does not removethe need for additional, targetedtechniques like those instituted in thisFinal Rule. For example, we are wellaware of other laws, such as thosegoverning perjury, that supportdetection and prosecution of fraud.However, such statutes are not alwayssufficient to prevent, deter and/or

redress unlawful conduct. By removingthe opportunity to engage in thefraudulent activity, this rule permitsexisting investigative and prosecutorialresources to be better focused, and freesresources across government agenciesfor other pressing needs.

We have no programmatic evidencethat applications filed under section

245(i) are particular sources of fraud. Inaddition, this suggested alternativewould result in a one-time solution,since the INA section 245(i) cases havealready been filed and are beingprocessed in the Departments BacklogProcessing Centers. Further, such apolicy would establish unequal rules foremployers based upon the unsupportedassumption that applications filedunder section 245(i) are the only ones inwhich substitution fraud occurs. Laborcertifications issued for 245(i) cases areindistinguishable from others andrequire the same steps of employers;

absent a strong rationale, they shouldnot be subject to different conditions orlimitations than the limitations thatattach to other labor certifications.

We also do not agree that exceptionsfor large corporations or for rural areasare warranted. Exceptions for certaincategories of employers, as suggested bycommenters, do not further theDepartments obligation to ensure asufficient test of the labor market for theadmission of each alien each time a jobopportunity opens. We also havedetermined that it is not wise toestablish a list of pre-approvedemployers, in part because the types of

fraud we are targeting by this Final Ruleare in some cases committed byattorneys and agents without theknowledge of the employer named onthe application.

3. Change in Conditions That OriginallyWarranted Allowance of the Practice

Various organizations providedcomments concerning currentprocessing times and the Departmentsremaining backlog of permanent laborcertification applications in relation tothe proposed ban on substitution. Thesecommenters generally took issue with

the Departments premise thatsubstitutions are no longer needed toaccommodate application processingdelays. Some commenters questionedthe premise based on the number ofapplications pending at theDepartments Backlog ProcessingCenters and experiences to date withapplications filed under the PERMsystem. They stated even if the BacklogProcessing Centers meet what appears to

be an unrealistic backlog eliminationgoal, the premise is quite obviouslyfalse.

For example, one commenter stated ithas 1,100 pending, unadjudicated laborcertification applications and that, inmany cases, because of the multi-yearadjudication times for theseapplications, the original alien

beneficiary has already moved on to anew position and the employeecurrently in the position has become the

new intended beneficiary of theapplication. Another commenterreferred to over 1,000 Reduction-in-Recruitment applications pending at theDepartments Backlog ProcessingCenters, and stated about half of all ofits PERM applications still remainpending for up to five months from dateof submission. Both commenterssuggested the Department shouldcontinue its efforts to eliminate the

backlog and to speed up the PERMprocess prior to considering changes tothe practice of substitution.

The Department disagrees. The

agency operating conditions underwhich alien substitution was initiallypermitted have noticeably changed. TheDepartment acknowledged in thepreamble of the proposed rule that thestrongest historical argument in supportof substitution has been the length oftime it once took to obtain a permanentlabor certification. 71 FR at 7656, 7659(February 13, 2006). However, theDepartment also noted the streamlinedprocess introduced by the PERMregulation has significantly reduced thelabor certification processing time forapplications filed under the newsystem. Since the PERM program began

accepting applications on March 28,2005, 68 percent of the certifiedapplications have been processed in lessthan 60 days. And in FY 2006 alone,approximately 75 percent of thecertified applications were approved in60 days or less. In addition, the PERMsystem will continue to improve as wegather baseline information from whichto implement process improvements. Inother words, we expect applications to

be adjudicated at least as quickly in thefuture as the system builds upon itsknowledge base.

With respect to the pending

applications at our Backlog ProcessingCenters, we have significantly reducedthe number of backlogged applicationsfrom an estimated 365,000 to less thanhalf that number. This effort places uson target to meet our goal of eliminatingthe backlog by September 30, 2007.Thus, the argument in support ofallowing substitutions to continue

because of long processing delays hasbeen appropriately addressed by boththe new, streamlined PERM process andthe large reduction in backloggedapplications. In light of these changes,



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we believe it is imprudent to wait toadopt this rule, as some commenterssuggest, until all backlogs arecompletely eliminated, thus givingthose who wish to fraudulently usesubstitutions additional time to do so.

4. Extending Regulation to PendingApplications for Permanent Labor

Certification and to ApprovedCertifications

The Department received a number ofcomments opposing the application ofthe substitution ban to applications filedunder 20 CFR part 656 in effect either

before March 28, 2005, or on or afterMarch 28, 2005, and to certificationsalready granted. These commentersurged the prohibition on substitutionshould be limited to only thoseapplications filed under the currentstreamlined regulation and should notencompass any applications filed underthe 20 CFR part 656 in effect beforeMarch 28, 2005.

Commenters stated employers andemployees across the country havemade critical hiring and transferdecisions in reliance on the availabilityof substitution. They stated that byapplying the rule change to allsubstitutions except those approved bythe effective date of the Final Rule, theDepartment would be setting itself upfor further challenges and pressures.The commenters cited Bowen v.Georgetown Univ. Hospital, 488 U.S.204 (1988), asserting it supported theircontention that a Federal agency lacksthe power to issue retroactive rules

absent a statutory grant of authority.They contended it is unfair, and mostlikely unlawful, for the Department tochange the rules midstream, and thatany change in the rules governingsubstitution should only be prospectivein effect.

Others commented that theDepartments proposed regulationconstitutes a retroactive ban that raiseslegal questions. Some stated theproposed rule improperly seeks toretroactively invalidate approved laborcertification applications, when suchapproval was obtained under the

current rule that such certifications arevalid indefinitely. Others stated theproposed application is contrary to theprohibition on retroactive agency rulesas found in the AdministrativeProcedure Act (APA). They noted that,under the APA, a rule is defined as thewhole or part of an agency statementof general or particular applicability and

future [emphasis added] effect designedto implement, interpret, or prescribe lawor policy. Commenters stated theDepartment would need specificauthority from the Congress to

promulgate retroactive regulations.Several commenters referenced HealthIns. Assn. of America, Inc. v. Shalala, 23F.3d 412, 423 (D.C. Cir. 1994) for theproposition that, under the APA, rulesmay only have future effect. The courtcited Justice Scalias concurrence inBowen v. Georgetown Univ. Hosp., 488U.S. 204, 21623 (1988), which

interpreted the APA to mean that a ruleis a statement that has legalconsequences only for the future andfound that a rule that alters a futureregulation in a manner that makesworthless substantial past investmentincurred in reliance upon the prior rulemay for that reason be found arbitraryor capricious. One commenterasserted the proposed provisionseliminating substitution would beillegal retroactive rulemaking becauseemployers have filed applications withthe expectation of substitution as apotentially significant benefit should

the original beneficiary drop out, andthis benefit is a form of a property right.One commenter argued the

application of the rule prohibitingsubstitution to backlogged applicationsunder the pre-PERM regulation wasretroactive in nature and could be readas an attempt to force the time andexpense of the new application underthe PERM process on employers whoalready have an investment inapplications in the backlog. Thecommenter said this would amount to ataking of a business investment withoutjust compensation. Similarly, anothercommenter asserted the elimination of

substitution constitutes a takingwithout compensation of anemployers significant investment in thepreparation and filing of pending andapproved labor certificationapplications. The commenter stated theprevention of an unknown and possiblyinsignificant level of fraud and abusedoes not justify this devaluation of acompanys investment. The commenterwent on to observe that eliminatingsubstitution would disproportionatelyimpact large high-tech employers,which file large numbers ofapplications. Finally, this commenter

stated years of processing delays havespurred employers to build substitutioninto a business practice as part of theirrespective programs.

In a similar vein, other commentersstated the prohibition of substitution isdetrimental to parties who have reliedon the current practice. Estoppel, theysaid, warrants that a person who hasrightfully relied on a practice should getthe benefit of that reliance. Employersand beneficiaries have depended on theability to substitute and have foregonefiling new applications because they

planned to use an application for aprevious employee for a currentemployee.

One commenter argued that dueprocess considerations of fair notice,reasonable reliance, and settledexpectations, affirmed in Immigrationand Naturalization Service v. St. Cyr,533 U.S. 289 (2001), should compel the

Department to strip from the rule anyprovision applying the ban onsubstitution retroactively. Thiscommenter asserted that, based on thatcase law, the 1996 Memorandum ofUnderstanding between the Departmentand the Immigration and NaturalizationService delegating to INS responsibilityfor substituting a named beneficiary ona labor certification, and longstandingagency practice, the Labor Departmentmay not now retroactively divest USCISand employers with pending laborcertification applications of the legalright to engage in the practice of

substituting alien beneficiaries. Thiscommenter further stated that if a casehas not yet been adjudicated, it isdifficult to imagine any harm resultingfrom a legitimate employer substitutinga new beneficiary on the pendingapplication.

Other commenters also pointed outthe hardship that the ban onsubstitution would cause to certainaliens. They stated prohibitingsubstitution on applications pendingprior to the effective date of the rule willrender countless beneficiaries who aresubject to the American

Competitiveness in the Twenty-FirstCentury Act (AC21), Public Law 106313 (October 17, 2000), stranded andunable to extend their current stays,since such extensions depend on theexistence of either a permanent laborcertification application that has beenpending for 365 days or more or apending Form I140 petition.

As an alternative to the proposal, onecommenter recommended thatsubstitution remain available for allcases currently pending at a BacklogProcessing Center. The commenter alsorecommended substitution remain

available for all cases as long as theemployer can demonstrate it hasengaged in some additional recruitmentand can document there are no qualifiedU.S. workers available. One commenterrecommended the substituted

beneficiary should be assigned thepriority date of the date of substitutionor, in the event substitution isprohibited, that the prohibition startwith the effective date of the rule, andnot be applied retroactively. Onecommenter suggested a grace periodprior to the ban becoming effective.



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We have carefully reviewed thesecomments and find they do not presentsufficient grounds to overcome therationale reflected in the NPRM toprohibit the practice of substitution onall labor certifications issued after theeffective date of this Final Rule.Assertions that the prospective ban onsubstitution of aliens is, instead, a

retrospective ban are misplaced. Pastsubstitution requests that already have

been approved are unaffected by thisrule. Current substitution requestspending on the effective date of this rulewill continue to be processed. Eventhough substitution will not bepermitted with respect to laborcertifications granted prior to this ruleseffective date and may upsetexpectations based on part 656 as itpreviously 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 morecomplex than the commenters suggest.The United States Supreme Court hasruled that [a] statute does not operateretroactively merely because it isapplied in case arising from conductantedating the statutes enactment.Landgrafv. USI Film Products, 511 U.S.244, 269 (1994). The Court went on tonote that determining whether a statuteis improperly retroactive requires theapplication offamiliar considerationsof fair notice, reasonable reliance, andsettled expectations. * * * Id. at 270.Application of the Landgrafprinciplesled the Court to reject a retroactivity

challenge to the application of theForeign Sovereign Immunities Act towrongdoing that occurred prior to thatlaws enactment. Republic of Austria v.Altman, 541 U.S. 677 (2004). Thesesame principles recently led an en bancSixth Circuit to uphold the applicationof a change in Social SecurityAdministration disability regulations topending cases. Combs v. Commissionerof Social Security, 459 F.3d 640 (6th Cir.2006). The Sixth Circuit followed thesame approach in finding that there wasno impermissible retroactive effect inapplying certain amendments to the

INA relating to the discretionaryremoval of relatives to aliens in the U.S.who sought to invoke the priorprocedure. Patelv. Gonzales, 432 F.3d685 (6th Cir. 2005). After applying theseprinciples to the current rulemaking, theDepartment has determined its proposalis appropriate.

An application for permanent alienlabor certification is filed at DOL withthe employer-applicants expectationthat it will satisfy the exclusionaryprovision in 8 U.S.C. 1182(a)(5)(A), soas to support a petition to DHS to

import the alien beneficiary of thecertification. That remains unchanged

by this rule.The Department has provided ample

notice of its intention to eliminatesubstitution, sufficient for employersand their representatives to reduce oreliminate continued reliance on thepractice. As early as 1991, we indicated

our intention to discontinue thepractice. 59 FR at 54920, 5492554926(Oct. 23, 1991). When the PERM FinalRule was published in 2004, itspreamble discussed at some lengthquestions relating to the practice ofsubstitution, the Departments findingsof an emerging market for fraudulentsale of labor certifications, and DOLsintent to examine the practice andexplor[e] in the near future regulatorysolutions to address this issue. 69 FRat 77363 (Dec. 27, 2004). In the NPRMto this Final Rule, the Department againannounced its intent to eliminate

substitution. Thus, we are confidentpublic notice and comment has beenfair, open, and consistent with theAdministrative Procedure Act. Anyemployer who has an applicationpending but who is either unable orunwilling to continue to sponsor theoriginal alien has had more thansufficient opportunity to identify a newalien and take advantage of the pastprocedures.

We have determined that employerscannot demonstrate they reasonablyrelied on the prior practice. In filing anapplication for permanent laborcertification, an employer is expressing

its intent to and expectation that it willhire the alien named on that documentif the application is approved. Anemployers hypothetical need tosubstitute, should the first alien nolonger be available, is not tantamount todetrimental reliance on an ability to doso. Commenters offered no explanationof how an employers initial filing can

be made in reliance on a future abilitytosubstitute. The risk any employersponsoring an alien takes is that thealien will not remain an employeethrough the entire permanent residenceprocess, or at the end of that process,

and the option of simply insertinganother alien has never been anentitlement. The INAs rule ofinadmissibility of immigrant workerswithout a test of the labor market foravailable U.S. workers, the statutesrequirement that admissibility bedetermined for each alien individually,and the statutes overall protection ofemployment rights of U.S. workers, eachfurther supports the Departmentsposition.

With respect to the claim of employerexpectations of an option to substitute,

the statute makes clear that an employerhas no absolute right to a laborcertification, and certainly no propertyinterest in one. Employers, particularlyregular users of the system, have knownabout the Departments intent to end thepractice of substitution since thepublication of the PERM regulations in2004. No employer could after that date

have had any reasonable expectationthat the practice would be indefinitelyavailable. Several commenters appear toargue that once they have applied for orsecured a labor certification for aparticular alien in a particular job, theyhave a right to bring in any alien theychoose for that job. The statutoryscheme, with its focus on individualaliens and presumption of each aliensinadmissibility, belies that argument.

Further, it is appropriate to apply theprohibition on substitution to the casesin our Backlog Processing Centers toensure these needed fraud protections

are applied throughout all permanentlabor certification cases, regardless ofwhere they reside in terms ofprocessing. Accordingly, theDepartment has determined that,following the effective date of this FinalRule, the elimination of aliensubstitution will apply to all permanentlabor certification applications pendingwith the Department and to allpermanent labor certifications issuedunder the current or prior regulation.This Final Rule does not nullifysubstitutions already made or inprogress, whether by the Department orDHS, but rather prohibits substitutions

in the future, substitutions whichemployers presumably do not anticipateand are not planned and, hence, towhich there is no right or reasonableexpectation. No labor certification may

be the subject of a substitution requestsubmitted on or after the effective dateof this rule.

This rule places no additionalresponsibilities on recipients of laborcertifications approved prior to theeffective date. At the time ofcertification a benefit was granted; nonewas waived. The required wage rateremains unchanged for employers. No

further recruitment for U.S. workers isrequired of the employers underapproved labor certifications. Once thecertification is filed with DHS insupport of a visa petition, and if theemployer and alien comply with allother applicable provisions of theimmigration laws, the alien beneficiarywill be admitted as a permanentresident.

All that is changed is that theemployer now will be encouraged toretain its original alien beneficiary(perhaps to that aliens benefit) or will



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have to file a new application on behalfof a new alien. An employer seeking tosubstitute, in fact, always has had toengage in a limited test of the labormarket. When the original alien

beneficiary no longer is available for thejob opportunity, the employer has hadto recruit the substitute alien, eitherdomestically among nonimmigrants, or

abroad to import a new foreign worker.This rule would make that labor markettest include not just foreign workers, butalso U.S. workers, at prevailing wagesand working conditions.

The standards in 8 U.S.C.1182(a)(5)(A) are quite broad. TheSecretary must decide whether there aresufficient U.S. workers who are able,willing, qualified, and available, andwhether the aliens employment wouldadversely affect the wages and workingconditions of these workers. The statuteleaves to the Department a broad areafor the exercise of its discretion in

issuing labor certificates.IndustrialHolographics, Inc. v. Donovan, 722 F.2d1362, 13651366 (7th Cir 1983). In theexercise of her discretion to issue laborcertifications, the Secretary is within theextensive bounds created by the INA. Id.If the employer files a new application,it will be considered fairly and on itsown merits. If approved, the new laborcertification will be for a more currentwage rate and subject to a more currentlabor market test, to the benefit of thenew alien and/or U.S. workers similarlyemployed. This is within the intent ofthe statute, and is an appropriatepreventative measure given the

deleterious effect caused by substitutionin the past. Given the Departmentsexpressed concerns about fraud in thelabor certification process, particularlywith respect to substitution, and theemerging black market in status as a

beneficiary of a labor certification, DOLsees a compelling need to protect theprograms integrity regardless of theprocessing status of a certification onthe effective date of the final rule. TheDepartments duty also to protect jobopportunities for U.S. workers, and thewelfare of both U.S. and foreignworkers, makes it necessary to end the

process of substitution after the effectivedate. See section I.D of this preamble,above.

Effect on aliens who are H1Bs andnot entitled to benefit from substitutionafter the fifth yearThe Departmentalso received comments regarding theeffect of the substitution ban onnonimmigrant aliens on whose behalfviable labor certifications have not beenfiled by the end of their fifth year in H1B status, and specifically on thesealiens ability to adjust their status tothat of immigrants. Under current law,

nonimmigrant H1B visa holders intheir sixth year of H1B status who arenamed on permanent labor certificationapplications that have been pending for365 days or more qualifyupon petitionto USCISfor extension of their H1Bstatus in one-year increments. AC21,section 106(a). Currently, USCIS allowsvisa holders in H1B status who are

substituted into labor certificationapplications by the end of their fifthyear to extend their nonimmigrantstatus beyond the normal six-yearmaximum. Commenters argued H1Bvisa holders who are unable either tohave a permanent labor certificationapplication filed on their behalf or to besubstituted into an existing application

by that time will lose the opportunityfor additional extensions of H1B status.

The Department understandsconcerns that, as a result of this rule, H1B nonimmigrant aliens who, after fiveyears of employment in the United

States, are not yet the beneficiary of apermanent labor certificationapplication might not be permitted byUSCIS to further extend their H1Bstatus prior to obtaining U.S. permanentresident status. However, theDepartment finds that continuingsubstitution as an accommodation tothis small group of individuals, a groupwhose numbers and participation in theprogram are both speculative, isdisproportionate to the adverseconsequences of continuing thesubstitution practice which creates bothan incentive and opportunity for fraud,and which deprives U.S. workers of job

opportunities.Some commenters have suggested that

since AC21 increased the portability ofH1B visas, allowing suchnonimmigrants to change employers,substitution by these foreign workersshould continue to be allowed. PublicLaw 106313, sec. 105. The Departmentsees no reason, as a general matter, topermit one type of nonimmigrant tocontinue benefiting from the practice ofsubstitution over other nonimmigrants.The portability provision seeks toincrease flexibility for a specific groupof nonimmigrantsH1B aliensunder

a specific set of circumstances; itgoverns transfers between positionswhich aliens fill on a temporary basis,and is triggered by the filing of a newLCA and petition. It does not address,and does not extend to, substitution,which is a function of the permanentresidence process. The statutorypermission to move from one employerto another as a proceduralaccommodation does not in turnmandate increased flexibility throughsubstitution in the permanent residenceprocess.

These commenters analysisincorrectly pairs portability with theextension beyond the six-year H1Bemployment limit allowed by section106(a) of AC21. The Department findsthat analysis flawed. The INA dictatesthat after six years, H1B status mustterminate. The specific exceptions tothat termination are linked by AC21 to

harm resulting from permanentresidence backlogs, including backlogsin the permanent labor certificationprogram. The extension beyond sixyears is intended by the statute to

benefit an H1B worker when 365 daysor more have elapsed since the filing ofa permanent labor certificationapplication on the aliens behalf (ifsuch certification is required for thealien to obtain status under such [INA]section 203(b)) * * *. Public Law 106313 section 106(a)(1). Clearly, the alienintended to be helped by this provisionis the alien who may have been

prejudiced by the backlog in processinglabor certification applications underDOLs pre-PERM regulations. An H1Bworker seeking substitution may have

benefited by working in the U.S. for sixor more years, but has not necessarily

been affected by the backlog at all. It isnot inconsistent with the statutoryintent of AC21 to limit the ability of thatalien to continue his or hernonimmigrant status to a laborcertification filed on his or her behalfrather than on someone elses behalf.

The Department recognizes that thosealiens who fall outside the five-yearmark will potentially be unable to

extend beyond the sixth year of H1Bstatus and otherwise might have beenable to do so through substitution. Thissmall group of affected individuals,however, does not present sufficientequities to persuade the Department tocarve out an exception to theprohibition on substitution, sinceemployers in such situations have hadupwards of five years in which toinitiate permanent resident status ontheir behalf.

Further, extension of an aliensnonimmigrant visa status is theprovince of USCIS, not the Department

of Labor. The Departments mandate isnot to preserve the opportunity orfurther the potential opportunity in allcircumstances for an employer to hirean immigrant worker, nor is it a processdriven by the interests of any or allaliens who may wish to enter the U.S.through employment-basedimmigration. The Departmentsmandate, rather, is to design andimplement a secure framework withinwhich an employer with legitimate

business needs may determine theavailability of U.S. workers and, if such



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workers are not found, bring in a foreignworker. Moreover, because the FinalRule prohibits only substitutions whichhave not yet been made, aliens whohave not otherwise begun thepermanent residence process before theend of the fifth year of H1B statuspresumably do not anticipate andtherefore cannot claim a reasonable

expectation of benefiting fromsubstitution.

5. Effect of the Elimination ofSubstitution on Employers

The Department received manycomments addressing the perceivedhardships employers would suffer ifsubstitution were prohibited.

Added cost and burdenEmployerswere concerned about loss of theirinvestment in the first application; theloss of an important employee retentionand recruitment tool; added cost and

burden from a new application,including advertising and recruitingcosts, staff time, legal fees; inherentdelays to getting a new worker in place,and potential processing delays with theDepartment or other agencies;additional costs from other parts of thepetitioning and visa application process;loss of place in the queue given visaretrogression; and retardation of

business growth and loss ofcompetitiveness from potential delaysin getting products to market. Somepointed to the potential negative impacton special groups, such as high-techemployers, nonprofits, or businesseslocated in rural areas. One commenter

stated that each set of costs should notbe viewed in isolation, but rathermultiplied by the number ofapplications for each employer, and thelarge number of employers that mustrespond to labor mobility andunforeseen business changes.

Despite a lack of consistentinformation from commenters on theadditional costs associated with newfilings, the Department is aware of andsensitive to the time and expenseemployers absorb to recruit and retain aqualified workforce. However, the costsassociated with the employment-based

immigration process, including the costsincurred by employers requestingpermanent labor certification, have beenan accepted part of the laborcertification process for almost 30 yearsand are not unanticipated by the statute.The INA presumes inadmissibility ofeach alien, and requires thepresumption be overcome for eachforeign worker through, in part, theSecretary of Labors determination. Ademonstration of worker unavailabilityis inherent to the process of filing alabor certification application, and it is

not unreasonable or inconsistent withthe INA to require recruitment everytime an employer seeks to bring in anew foreign worker. Recruitmentactivities and the costs associated withthem are equally as appropriate for thewould-be substituted foreign worker asthey were for the originally namedalien. Accordingly, while we are

sensitive to employers concerns, wemust nevertheless conclude thatelimination of the current substitutionpractice is amply justifiednotwithstanding.

In addition, the Department fullyrecognizes that substitution has becomea tool to address visa retrogression.However, the Department is notconvinced it should retain a policy onsubstitution that gives rise to significantfraud and may adversely affect U.S.workers as a means to cope with thevisa cap issue, or to support anyunintended cost savings for employers

that may have resulted from thispractice.Loss of priority dateMany

commenters expressed concern over theloss of the visa priority date when a newapplication is required to hire a newalien. Our program experience indicatesthat the priority date plays a definingrole in the commoditization of laborcertifications; substitution enhances thelabor certifications marketability.Commoditization stems from the abilityto substitute aliens on laborcertifications, which are validindefinitely, while maintaining thepriority date of the original filing.

Indeed, the priority date is often a primemotivator for the marketability andadded value of labor certifications. It isalso not necessarily true that theavailability of substitution is beneficialto aliens as a class. As stated in theNPRM, under the substitution processcurrently in place, the new alien

beneficiary is inserted into an in-processapplication or certification initially filedfor a different alien and with a filingdate that is often years earlier than thesubstituted alien would have received ifnamed in a newly filed application.

We are aware of concerns that these

practices make substitutionfundamentally unfair to other aliens(and their petitioning employers)seeking to immigrate to the U.S. whoremain below the substituted worker inthe visa priority date queue, as well asto U.S. workers. See 71 FR 7656 (Feb.13

Documents

Department of Labor: 72 FED REG