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  • Article: H-1B Petitions Involving Third-Party Worksites: A look at what 'specialty occupation', 'employment', 'employee' and 'employer-employee relationship' now means - Part 1 By Jagan Tamirisa

    H-1B Petitions Involving Third-Party Worksites: A look at what 'specialty occupation', 'employment', 'employee' and 'employer-employee relationship' now means - Part 1

    by


    Ever since there has been a change of administration, the landscape of U.S. Immigration Laws has been changing too. The priorities of the new administration has been more towards suppressing illegal immigration, limiting legal immigration, phasing out few programs, and increased immigration enforcement[1]. On April 18, 2017 an Executive Order[2] was signed that included a directive to Department of Homeland Security to advance policies to help ensure H-1B visas are awarded to the most-skilled or highest-paid beneficiaries. USCIS had decided to implement the EO by working on a combination of rulemaking, policy memoranda, and operational changes. With regards to nonimmigrant employment visa programs, the administration implemented several policy changes that had direct impact on those programs. One such substantial policy change affecting H-1B and L-1 visa programs was issued on 10/23/2017[3] affectively rescinding USCIS longstanding policy of giving deference to previously adjudicated petitions when reviewing extension petitions. As a result of this change, the new set of RFEs that are now being issued on extension petitions are marked with a note stating, “DEFERENCE NOT BEING GIVEN”.

    Most recently, i.e., on 02/22/2018, USCIS issued a new memorandum (“new memo”) titled “Contracts and Itineraries Requirements for H-1B Petitions Involving Third-Party Worksites” that will also substantially impact companies (such as IT companies) ability to petition for H-1B workers.

    On a cursory look, the new memo seems to be reiterating existing policy that H-1B employees placed at third party worksites must demonstrate of both sufficient specialty occupation work and employer-employee relationship with the petitioner, for the duration of the requested employment period. However, in reviewing the memo with the current trend of H-1B adjudications, it appears that USCIS is working on implementing changes to the traditionally understood meaning of the H-1B employment. Effectively, the new memo overrides June 6, 1995 memo (“Contracts Memo”) on “Contracts Involving H-1B Petitions”, the November 13, 1995 memo (“H-1B Supporting Documents Memo”) on “Supporting Documentation for H-1B petitions”, the December 29, 1995 memo (“Itinerary Memo”) on “Interpretation Of The Term ‘Itinerary’ Found in 8 CFR 214.2(h)(2)(i)(B) As It Relates To The H-1B Nonimmigrant Classification”, and supplements the January 8, 2010 memo on “Determining the Employer-Employee Relationship for Adjudication of H-1B Petitions, Including Third-Party Site Placements”.

    In the new memo, USCIS addresses the issues of “specialty occupation” and “employer-employee relationship”, particularly in a situation where the H-1B beneficiary will be working at a third-party worksite (i.e., at a place of employment other than that of the H-1B petitioner’s). This is not a surprise move as USCIS had already expressed its intent to issue a rule aimed at “Strengthening the H-1B Nonimmigrant Visa Classification Program”. The new memo seems to be in a direct correlation with the proposed rule listed in the Fall 2017 regulatory agenda[4], the abstract of which reads:

    The Department of Homeland Security (DHS) will propose to revise the definition of specialty occupation to increase focus on obtaining the best and the brightest foreign nationals via the H-1B program, and revise the definition of employment and employer-employee relationship to better protect U.S. workers and wages. In addition, DHS will propose additional requirements designed to ensure employers pay appropriate wages to H-1B visa holders.

    The purpose of these changes is to ensure that H-1B visas are awarded only to individuals who will be working in a job which meets the statutory definition of specialty occupation. In addition, these changes are intended to ensure that the H-1B program supplements the U.S. workforce and strengthens U.S. worker protections.

    Emphasis Provided.

    The motive of the new memo seems to address H-1B adjudications in the situation where H-1B beneficiaries work at client sites, either through a direct placement, or through a sub-contractor(s). This type of placement is very common scenario within the Information Technology (IT) industry. Few IT companies ‘lend’ their professionals to sub-contractors, who then may either further sub-contract them to next layer of vendor companies, or place them at the end-client entity with which they may have a direct relationship. In recognizing the existence of such contractual chain, USCIS says that there is a potential opportunity for occurrence of violations, such as: paying H-1B employees less than the required wages, benching H-1B employees, or where H-1B beneficiaries perform non-specialty occupation jobs etc. In other words, USCIS seems to be taking a position that, without sufficient evidence, evaluating H-1B petitions for occupations filed under above circumstances has become difficult. Therefore, USCIS is now insisting that where the H-1B beneficiary will work at third-party site, the petitioner must now submit corroborative evidence demonstrating that such employment is not speculative. The evidence must show that:

    · The petitioner has a specific work assignment in place for the beneficiary;

    · The petition is properly supported by a Labor Condition Application (LCA) that corresponds to such work; and

    · The actual work to be performed by the H-1B beneficiary will be in a specialty occupation based on the work requirements imposed by the end-client who uses the beneficiary’s services.

    In evaluating these kinds of petitions, USCIS will no longer rely on petitioner’s self-serving statements, but petitioners must now produce contractual documents (such as work orders etc.) which detail their assignments at third-party locations with sufficient specificity. If such documentation cannot be produced, USCIS will deny those H-1B petitions.

    Besides showing that there is a specific work assignment at the third-party client location(s), petitioners are also required to demonstrate the existence of employer-employee relationship between the petitioner and the H-1B beneficiary throughout the duration of the requested employment period.

    ‘United States Employer’ and establishing ‘Employer-Employee Relationship’

    Ever since the 2010 Employer-Employee memo was published, several RFEs trickled in requesting petitioners to submit evidence of employer-employee relationships. Most petitioners would respond back with documentation including employment agreements, status reports, performance reviews, work orders, end-client letters, Master-Service Agreement (MSA) copies etc. to establish the relationship. Until recently, submission of these types of evidences at most amounted to approval of the petition. However, recent spate of decisions from Administrative Appeals Office (AAO) seems to up the level of documentation requirement for such type of requests, and in fact, making it harder for the petitioners to meet the burden of proof.

    The new memo captured AAO adjudications trend. The AAO decisions have focused more on definition of ‘employer’, what constitutes ‘employment’ and ‘employer-employee relationship’, who is an ‘employee’, and how ‘specialty occupation’ must be assessed when it comes to H-1B petitions placed at third part worksites. Furthermore, where such elements of relationship were not established, AAO did not hesitate in calling out those work relationship as a ‘speculative employment’.

    To a limited extent, AAO is following the 2010 Employer-Employee memo, which focuses on the definition of ‘employer’. The term ‘employer’ has been defined at 8 C.F.R. Sec. 214.2(h)(4)(iii), and one of the elements of this definition is that employer must have ‘employer-employee relationship’ with the ‘employee’ (i.e., the H-1B employee) and this relationship is evidenced by employer’s ability to ‘hire, pay, fire, supervise, or otherwise control the work of any such employee’. But, since H-1B regulations do not define the terms ‘employee’ and ‘employer-employee relationship’, USCIS is relying on the Supreme Court rulings which said “where the federal law fails to define the term ‘employee’, courts should conclude that the term was intended to describe the conventional master-servant relationship as understood by the common-law agency doctrine.” In their decisions, AAO has reiterated that the H-1B regulations did not intend to extend the definition of the terms ‘employer’, ‘employee’, and ‘employment’ beyond "the traditional common law definition".[5]

    While the Employer-Employee memo lists several factors that would be considered to establish employment relationship, amongst them AAO is giving greater importance to ‘control’. An example of ‘control’ that AAO commonly cites across these decisions, which emulates business process followed by IT consulting business, is "while the assignment of additional projects is dependent on who has the right to assign them, it is the actual source of the instrumentalities and tools that must be examined, and not who has the right to provide the tools required to complete an assigned project.” Therefore, in considering whether or not one will be an "employee” in an "employer-employee relationship" with a "United States employer" for purposes of H-18 nonimmigrant petitions, AAO said the focus must be on the common-law touchstone of “control”. In evaluating existence of control, the AAO said it must look at factors such as:

    · when, where, and how a worker performs the job;

    · the continuity of the worker's relationship with the employer;

    · the tax treatment of the worker;

    · the provision of employee benefits; and

    · whether the work performed by the worker is part of the employer's regular business.

    While existence of control will be evaluated on a case-by-case basis (which is in line with the 2010 Employer-Employee memo), USCIS will consider all circumstances in the relationship between the parties, regardless of whether the parties refer to it as an employee or as an independent contractor relationship. In doing so, AAO will not rely on self-styled documents such as 'employment agreement'. In applying these tests and factors, AAO did not find existence of Employer-Employee relationship in a host of decisions, and determined that petitioner would not qualify as a “United States Employer”. A few of these decisions are referenced below:

    Position

    Petitioner’s Business

    Citation

    Project Manager

    IT Consulting

    Matter of B-, Inc., ID# 953996 (AAO Jan. 29, 2018)

    Software QA Engineer and Tester

    IT Consulting

    Matter of M-T-, LLC., ID# 863764 (AAO Jan. 29, 2018)

    Software Developer

    IT Consulting

    Matter of M-S-, Inc., ID# 112294 (AAO Jan. 29, 2018)

    Business Systems Analyst

    Computer Programming

    Matter of D-S-S, Inc., ID#811137 (AAO Jan. 19, 2018)

    Software Test Engineer

    IT Consulting

    Matter of N-T-S- Inc., ID#1115517 (AAO Feb. 5, 2018)

    Matter of B-, Inc. AAO concluded that the petitioner did not meet the definition of U.S. Employer because it did not demonstrate with enough specificity how it will supervise and control the H-1B beneficiary’s day-to-day activities while the beneficiary is working at the end-client premises. Although AAO noted that the petitioner maintained it would hire, assign, and pay the H-1B beneficiary, the AAO said that since the H-1B beneficiary would be providing services to the end-client (and not to the petitioning organization), and as the end-client is the actual recipient of the H-1B beneficiary’s services, it (end-client) is the entity controlling H-1B beneficiary’s day-to-day activities. In arriving to this conclusion, AAO focused its attention to the details provided in the work orders, master services agreement that were submitted with the appeal[6]. Further, AAO turned down petitioner’s argument that although the MSA stated petitioner’s representatives are not employees of end-client, its meaning was determined to be limited to an end-client avoiding responsibilities regarding employee benefits, but that sentence does not conclusively establish that the petitioner controls and supervises H-1B beneficiary’s work. Many consulting companies that rely on these statements to establish control must now be aware that they are now required to submit a more corroborative and persuasive evidence to establish that they exercise real supervision and control. Mere restatement of clauses from the MSA will not be held to meet the standards. While acknowledging that the petitioners pay the social security and FICA taxes and other employee benefits to the H-1B beneficiary, nevertheless, AAO concluded more important factors to be considered are “who will oversee and direct the Beneficiary's work, who will provide the instrumentalities and tools utilized, where the work will be located, and who has the right or ability to affect the projects to which the Beneficiary is assigned.” As AAO noted in that decision, without full analysis of these factors, it will be difficult to determine if the requisite employer-employee relationship will exist between the Petitioner and the H-1B Beneficiary.

    Matter of M-T-, LLC. This case involved multiple layers of sub-contractors (at least 2 vendors) between the petitioner and the ultimate end-client. In analyzing if petitioner exercised control over the beneficiary, AAO determined that “Pay Statements”, “Employment Agreement”, ’Vendor Letters’ and ‘Performance Reviews’ were not material to the issue. Moreover, with respect to performance reviews, AAO said it was insufficient as there was no showing in how the petitioner evaluates the specific duties performed by the Beneficiary when working at the end-client's location and if Petitioner will assign and control the Beneficiary's work at the end-client's location. Thus, AAO could not find the requisite employer-employee relationship between the Petitioner and the H-1B Beneficiary.

    Matter of M-S-, Inc. This case involved a single layer of sub-contractor between the petitioner and the ultimate end-client. Although the petitioner contended that they will conduct periodic performance reviews and supervise all aspects of beneficiary’s duties through status call using Skype/webex/the phone, AAO found that the petitioner did not establish sufficiently how it will manage and direct the beneficiary’s day-to-day duties, how it will supervise the beneficiary in order to objectively monitor and evaluate his performance review at the end-client’s location noting “a nominal reference to conducting performance reviews, without a methodology to monitor the Beneficiary's actual performance, is insufficient to meet the Petitioner's burden of proof.

    Matter of D-S-S, Inc. AAO did find the existence of employment relationship under common-law sense, and instead deemed the petitioner as supplier of personnel to client-companies. In reviewing the performance reviews petitioner conducted, AAO dismissed its persuasive value in establishing employment relationship because AAO felt there was no meaningful indication that the petitioner was directing and reviewing beneficiary’s work performed at end-client office. AAO had also noted that the email communications submitted as evidence, of employee’s work product, did not include any members of the petitioner. Even though the petitioner paid social security and FICA taxes when it issued paystubs, and paid for some employee benefits, however, AAO considered the most important factor to be established is petitioner’s control.

    Matter of N-T-S-, Inc. AAO did not find employment relationship even after considering the employment agreement, petitioner’s pay stubs, professional services agreement on the ground that these documents did not establish petitioner’s control over the beneficiary from initial vendor through mid-vendor to the end-client. AAO agreed with the Director’s decision that the documents did not establish beneficiary was using petitioner’s tools, nor that they would evaluate the end-product of beneficiary’s work.

    Next Part: Determining “Specialty Occupation"

    This concludes discussion on recent trends on how AAO/USCIS is determining employer-employee relationship in situations involving third-party placement. The next part will focus on the changing trends in determining specialty occupation for these kinds of H-1B petitions.



    [1] Some actions that the administration took include terminating Deferred Action for Childhood Arrivals (DACA), Temporary Protected Status (TPS) for Sudan, Guinea, Liberia, Sierra Leone, Haiti and El Salvador, setting up a national vetting center, and a potential move to eliminate the H-4 EAD and International Entrepreneur programs.

    [2] EO 13788 titled “Buy American, Hire American”

    [3] USCIS memo tiled “Rescission of Guidance Regarding Deference to Prior Determinations of Eligibility in the Adjudication of Petitions for Extension of Nonimmigrant Status” rescinding its April 23, 2004 memo titled “The Significance of a Prior CIS Approval of a Nonimmigrant Petition in the Context of a Subsequent Determination Regarding Eligibility for Extension of Petition Validity.

    [4] See RIN: 1615-AC13 available at the website, https://www.reginfo.gov/

    [5] See Nationwide Mut. Ins. Co. v. Darden 503 U.S. 318, 322-23 (1992) and Clackamas Gastroenterology Assocs. P.C. v. Wells, 538 U.S. 440 (2003).

    [6] AAO noted that in that particular case, petitioner did not submit an end-client letter.

    Note that the information contained in this article is intended to educate public generally about immigration, its benefits, and adjudication trends, but is not intended to provide solutions to any individual's situation(s). The general information being provided in this document must not to be construed as a legal advice. If you need a legal advice, you must contact an Immigration Attorney.


    About The Author

    Jagan Tamirisa. The author works for a law firm in Washington DC metro area. The views expressed here are that of the author, based on his research, and is NOT imputed to any Law Firm or Immigration Practitioner.

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