USCIS Memo Imposes New Requirements on H-1B Employers

On January 8, 2010, the Department of Homeland Security's USCIS (former INS) implemented new requirements for US employers seeking to hire or retain H-1B professional workers.

The underlying purpose of the new guidance is to eliminate so called "job-shops" - defined by USCIS as a US company who sponsors an H-1B worker, and then places that worker with another employer. The underlying purpose of eliminating job shops is to encourage US companies to hire American workers, as opposed to their foreign counterparts.

Unfortunately, in today's global economy we feel that faced with the choice of outsourcing work vs. hiring American workers, many US companies will move the job overseas to India or China, or fold under the pressure of today's economic climate. The last thing the US economy needs right now is to force more work overseas, off of US soil.

The impact of the new requirements will be felt primarily by IT consulting firms, whose services are becoming increasingly valuable to US businesses trying to stay competitive in today’s global market.

These companies will now be required provide extensive (read: overly burdensome) documentation to establish that they “control” the work of the H-1B employee, i.e. that they are not a "job-shop".

Among other forms of evidence (which are outlined below), we expect employment contracts to play a large role in addressing USCIS concerns about the existence of an employer-employee relationship. As such, we are suggesting to our clients that they work closely with employment law counsel to ensure that contracts include provisions which clearly demonstrate control over the H-1B employee, regardless of where the employee is placed.

We are also advising clients to expect shorter petition validity dates. Historically, USCIS approves H-1B petitions for three years. However, the new guidance emphasizes the need to establish the employer-employee relationship throughout the requested validity period.

As a result, we are inferring that USCIS will begin approving cases for terms of less than three years, to match the underlying documentation provided.

Notably, as a result of Requests for Evidence (RFEs) routinely issued by the USCIS in perceived “job-shop” cases, Law Office of Michael Ryvin has already been filing H-1B petitions with much of evidence required in the new memo.

However, the fact remains that thousands of US employers, small to mid-sized businesses, badly need important computer, engineering, and other outsourced work to stay alive in this difficult economy – and the USCIS just made things more difficult for these businesses.

For your reference, directly from the memo:

Employer-Employee Relationships

USCIS must look at a number of factors to determine whether a valid employer-employee relationship exists. Engaging a person to work in the United States is more than merely paying the wage or placing that person on payroll. In considering whether or not there is a valid “employer-employee relationship” for purposes of H-1B petition adjudication, USCIS must determine if the employer has the sufficient level of control over the employee. The petitioner must be able to establish that it has the “right to control” over when, where, and how the beneficiary performs the job and USCIS will consider the following to make such a determination (with no one factor being decisive):

(1) Does the petitioner supervise the beneficiary and is such supervision off-site or on-site?
(2) If the supervision is off-site, how does the petitioner maintain such supervision, i.e. weekly calls, reporting back to main office routinely, or site visits by the petitioner?
(3) Does the petitioner have the right to control the work of the beneficiary on a day-to-day basis if such control is required?
(4) Does the petitioner provide the tools or instrumentalities needed for the beneficiary to perform the duties of employment?
(5) Does the petitioner hire, pay, and have the ability to dire the beneficiary?
(6) Does the petitioner evaluate the work-product of the beneficiary, i.e. progress/performance reviews?
(7) Does the petitioner claim the beneficiary for tax purposes?
(8) Does the petitioner provide the beneficiary any type of employee benefits?
(9) Does the beneficiary use proprietary information of the petitioner in order to perform the duties of employment?
(10) Does the beneficiary produce an end-product that is directly linked to the petitioner’s line of business?
(11) Does the petitioner have the ability to control the manner and means in which the work product of the beneficiary is accomplished?

According to the memorandum, the petitioner will have met the test if, in the totality of the circumstances, a petitioner is able to present evidence to establish its right to control the beneficiary’s employment. The petitioner must also be able to establish its right to control the beneficiary’s work will continue to exist throughout the duration of the beneficiary’s employment term with the petitioner.

Evidence to be submitted with the Initial Petition:

The petitioner must clearly show that an employer-employee relationship will exist between the petitioner and beneficiary, and establish that the employer has the right to control the beneficiary’s work, including the ability to hire, fire and supervise the beneficiary. The petitioner must also be responsible for the overall direction of the beneficiary’s work. Lastly, the petitioner should be able to establish that the above elements will continue to exist throughout the duration of the requested H-1B validity period. The petitioner can demonstrate an employer-employee relationship by providing a combination of the following or similar types of evidence:

• A complete itinerary of services or engagements that specifies the dates of each service or engagement, the names and addresses of the actual employers, and the names and addresses of the establishment, venues, or locations where the services will be performed for the period of time requested;
• Copy of the signed Employment Agreement between the petitioner and the beneficiary detailing the terms and conditions of employment;
• Copy of the relevant portions of valid contracts between the petitioner and a client (in which the petitioner has entered into a business agreement for which the petitioner’s employees will be utilized) that establishes that while the petitioner’s employees are placed at the third-party worksite, the petitioner will continue to have the right to control its employees;
• Copies of signed contractual agreements, statements of works, work orders, service agreements, and letters between the petitioner and the authorized officials of the ultimate end-client companies where the work will actually be performed by the beneficiary, which provide information such as a detailed description of the duties the beneficiary will perform, the qualifications that are required to perform the job duties, salary or wages paid, hours worked, benefits, a brief description of who will supervise the beneficiary and their duties, and any other related evidence;
• Copy of position description or any other documentation that describes the skills required to perform the job offered, the source of the instrumentalities and tools needed to perform the job, the product to be developed or the services to be provided, the location whether the beneficiary will perform the duties, the duration of the relationship between the petitioner and beneficiary, whether the petitioner has the right to assign additional duties, the extent of petitioner’s discretion over when and how long the beneficiary will work, the method of payment, the petitioner’s role in paying and hiring assistants to be utilized by the beneficiary, whether the work to be performed is part of the regular business of the petitioner, the provision of employee benefits, and the tax treatment of the beneficiary in relation to the petitioner;
• A description of the performance review process; and/or
• Copy of the petitioner’s organizational chart, demonstrating beneficiary’s supervisory chain.

Evidence to be submitted with the Extension of Status Petition (Same Employer):

An H-1B petitioner seeking to extend H-1B employment for a beneficiary must continue to establish that a valid employer-employee relationship exists. The petitioner can do so by providing evidence that petitioner continues to have the right to control the work of the beneficiary, as described above.

The petitioner may also include a combination of the following or similar evidence to document that it maintained a valid employer-employee relationship with the beneficiary throughout the initial H-1B status approval period:

• Copies of the beneficiary’s pay records (leave and earnings statements, and pay stubs, etc.) for the period of the previously approved H-1B status;
• Copies of the beneficiary’s payroll summaries and/or Form W-2s, evidencing wages paid to the beneficiary during the period of previously approved H-1B status;
• Copy of prior years’ work schedules;
• Documentary examples of work product created or produced by the beneficiary for the past H-1B validity period, (i.e. copies of: business plans, reports, presentations, evaluations, recommendations, critical reviews, promotional materials, designs, blueprints, newspaper articles, web-site text, news copy, photographs of prototypes, etc.). Note: the materials must clearly substantiate the author and date created;
• Copy of dated performance review(s); and/or
• Copy of any employment history records, including but not limited to, documentation showing date of hire, dates of job changes, i.e. promotions, demotions, transfers, layoffs, and pay changes with effective dates.

If USCIS determines, while adjudicating the extension petition, that the petitioner failed to maintain a valid employer-employee relationship with the beneficiary throughout the initial approval period, or violated any other terms of its prior H-1B petition, the extension petition may be denied unless there is a compelling reason to approve the new petition (e.g., the petitioner is able to demonstrate that id did not meet all the terms and conditions through no fault of its own). Such a limited exception will be made solely on a case-by-case basis.

Requests for Evidence (RFEs) to Establish Employer-Employee Relationship

USCIS may issue a Request for Evidence (RFE) when USCIS believes that the petitioner has failed to establish eligibility for the benefit sought, including in cases where the petitioner has failed to establish that a valid employer-employee relationship exists and will continue to exist throughout the duration of the beneficiary’s employment term with the employer. Such RFEs, however, must specifically state what is at issue (e.g. the petitioner has failed to establish through evidence that a valid employer-employee relationship exists) and be tailored to request specific illustrative types of evidence from the petitioner that goes directly to what USCIS deems as deficient. Officers should first carefully review all the evidence provided with the H-IB petition to determine which required elements have not been sufficiently established by the petitioner. The RFE should neither mandate that a specific type of evidence be provided, unless provided for by regulations (e.g. an itinerary of service dates and locations), nor should it request information that has already been provided in the petition. Officers should state what element the petitioner has failed to establish and provide examples of documentation that could be provided to establish H-1B eligibility.

Compliance with 8 C.F.R. 214.2(h)(2)(i)(B)

Not only must a petitioner establish that a valid employer-employee relationship exists and will continue to exist throughout the validity period of the H-IB petition, the petitioner must continue to comply with 8 C.F.R. 214.2(h)(2)(i)(B) when a beneficiary is to be placed at more than one work location to perform services. To satisfy the requirements of 8 C.F.R. 214.2(h)(2)(i)(B), the petitioner must submit a complete itinerary of services or engagements that specifies the dates of each service or engagement, the names and addresses of the actual employers, and the names and addresses of the establishment, venues, or locations where the services will be performed for the period of time requested. Compliance with 8 C.F.R. 214.2(h)(2)(i)(B) assists USCIS in determining that the petitioner has concrete plans in place for a particular beneficiary, that the beneficiary is performing duties in a specialty occupation, and that the beneficiary is not being “benched” without pay between assignments.