• New J-1 Regulation Requires Annual Audits, Reports to Department of State
  • October 20, 2014
  • Law Firm: Fragomen Del Rey Bernsen Loewy LLP - New York Office
  • An interim final rule from the Department of State (DOS) advances new requirements for J-1 program sponsors: to undergo annual management reviews of their internal controls and to file yearly reports with DOS.

    The annual management reviews must be performed by independent auditors, who must review the sponsor’s internal controls as well as the files of a statistically valid sampling of the J nonimmigrants.

    Although DOS has not yet published the timeline for J-1 sponsors in the Trainee and Intern categories, the expanded audit requirement now applies to all J-1 program sponsors, in contrast to being limited to only Au Pair sponsors previously. The Secondary School Student category will be first tapped for this obligation. Audits for other categories will be rolled out in staggered schedules. Sponsors with programs fully funded by federal, state, and local governments are exempt because they are audited under other governmental requirements.

    Most provisions of the interim final rule will take effect on January 5, 2015. Implementation of certain audit requirements will be phased in in stages, and the new insurance requirements become effective on May 15, 2015. The 60-day comment period for the interim final rule will close on December 5, 2014.

    New Compliance Obligations

    J program sponsors also must maintain lists of all domestic and foreign third-parties with whom they have written agreements covering J program conduct. Qualifying third-parties will likely include third-party host organizations, immigration law firms, relocation providers, and recruiters, and do not include administrative service providers, such as for cleaning, payroll, and utilities.

    Responsible Officers (ROs) and Alternate Responsible Officers (AROs) must be familiar with all J program regulations and also with federal, state and local laws, including employment laws like the Fair Labor Standards Act if the sponsor’s J-1 program has an employment component, as is true for sponsors and third-party host organizations in the Trainee and Intern categories.

    ROs and AROs must undergo criminal background checks before holding and performing the officer roles. These checks must be renewed every four years. ROs and AROs must be employees of the program sponsor, though DOS may permit third-parties to be AROs in its discretion.

    New Minimums for Health Insurance Coverage

    The mandatory health insurance coverage minimum has been increased from $50,000 to $100,000 per accident or illness. In addition, J-2 dependents must now be covered by qualifying insurance.

    Sponsors must educate exchange visitors about the insurance requirements, but J nonimmigrants bear the burden of obtaining qualifying insurance. Sponsors must terminate the exchange program where the J participant willfully fails to secure the required coverage. These new requirements take effect on May 15, 2015, so sponsors may fulfill existing agreements with insurance providers and negotiate new purchase contracts.

    Additional Administrative Duties

    The following new obligations will likely impact RO and AROs in administering exchange visitor program duties:

    • The English language verification protocols currently applicable to the Trainee and Intern categories will be required for all categories although in a modified manner.
    • Changes to the J-1 nonimmigrant's site of activity must also be updated within 10 business days. Multiple sites of activity may be categorized as primary and secondary within SEVIS.
    • Changes to the J-1 nonimmigrant's residential address, telephone number, or email address must be updated in SEVIS within 10 business days of notification from the foreign national.

    The following new obligations affect designation and re-designation of J program sponsor status:

    • DOS will continue to conduct on-site review of current J sponsors to monitor compliance. The mandatory pre-designation site visit requirement introduced in the proposed regulation was removed, though DOS may visit the sponsor-applicant's worksite in its discretion.
    • Re-designation of J-1 program sponsor status will be issued with validity periods of one to two years, with DOS determinations made on a case-by-case basis.
    • Re-designation requests must be filed within six months and no later than three months of expiration. The J program may continue to operate until DOS issues a decision on the re-designation request.
    • DOS also removed the obligation that sponsors obtain and submit Dun and Bradstreet reports.

    What This Means for Employers and Foreign Nationals

    Compliance with the new regulation is likely to present a significant administrative and financial burden to employers who are J-1 program sponsors, particularly for the annual audit and reporting obligation. J-1 program sponsors may in turn impose additional requirements on companies who serve as third-party host organizations to exchange visitors.

    Employers who are J program sponsors should communicate with employment and labor counsel to ensure compliance with all applicable federal, state and local employment laws.