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Rami Fakhoury and Mark Levey

Appendix V

THE NEUFELD MEMO

U.S. Department of Homeland Security

U.S. Citizenship and Immigration Services

Service Center Operations Directorate.

Washington, DC

20529-2060

U.S. Citizenship and Immigration Services

HQ 70/6.2.8

JAN 08 2010

AD 10-24

Memorandum

TO:

Service Center Directors

FROM:

Donald Neufeld

Associate Director, Service Centers

SUBJECT:

Determining Employer-Employee Relationship for Adjudication ofH-1B

Petitions, Including Third-Party Site Placements

Additions to Officer's Field Manual (AFM) Chapter 31.3(g)(15) (AFM Update

AD 10-24) /

I. Purpose

This memorandum is intended to provide guidance, in the context of H-1B-petitions, on the

requirement that a petitioner establish that an employer-employee relationship exists and will

continue to exist with the beneficiary throughout the duration of the requested H-1B validity

period.

II. Background

Section 101(a)(15)(H)(i)(b) of the Immigration and Nationality Act (INA) defines an H-1B

nonimmigrant as an alien:

who is coming temporarily to the United States to perform services.. .in a specialty"

occupation described in section 1184(i)(1)..., who meets the requirements of the

occupation specified in section 1184(i)(2)..., and with respect to whom the Secretary of

Labor determines and certifies...that the intending employer has filed with the Secretary

an application under 1182(n)(1).

The Code of Federal Regulations (C.F.R.) provides that a "United States employer" shall file an

[H-1B] petition. 8 C.F.R. 214.2(h)(2)(i)(A).

The term "United States employer", in turn, is defined at 8 C.F.R. 214.2(h)(4)(ii) as follows:

Memorandum for Service Center Directors

Subject: Determining Employer-Employee Relationship for Adjudication of H-IB Petitions,

Including Third-Party Site Placements

Page 2

United States employer means a person, firm, corporation, contractor, or other

association, or organization in the United States which: .

(1) Engages a person to work within the United States;

(2) Has an employer-employee relationship with respect to employees under this part,

as indicated by the fact that it may hire, pay, fire, supervise, or otherwise control the

work of any such employee; and

(3) Has an Internal Revenue Service Tax identification number.

In support of an H-1 B petition, a petitioner must not only establish that the beneficiary is coming to the United States temporarily to work in a specialty occupation but the petitioner must also satisfy the requirement of being a U.S. employer by establishing that a valid employer-employee relationship exists between the U.S. employer and the beneficiary throughout the requested H-IB validity period. To date, USCIC has relied on common law principles1 and two leading Supreme Court cases in determining what constitutes an employer-employee relationship2

The lack of guidance clearly defining what constitutes a valid employer-employee relationship as required by 8 C.F.R. 214.2(h)(4)(ii) has raised problems, in particular, with independent contractors, self-employed beneficiaries, and beneficiaries placed at third-party worksites. The placement of the beneficiary/employee at a work site that is not operated by the petitioner/employer (third-party placement), which is common in some industries, generally makes it more difficult to assess whether the requisite employer-employee relationship exists and will continue to exist.

While some third-party placement arrangements meet the employer-employee relationship criteria, there are instances where the employer and beneficiary do not maintain such a relationship. Petitioner control over the beneficiary must be established when the beneficiary is placed into another employer's business, and expected to become a part of that business's regular operations. The requisite control may not exist in certain instances· when the petitioner's business is to provide its employees to fill vacancies in businesses that contract with the petitioner for personnel needs. Such placements are likely to require close review in order to determine if the required relationship exists.

Furthermore, USCIS must ensure that the employer is in compliance with the Department of Labor regulations requiring that a petitioner file an LCA specific to each location where the USCIS has also relied on the Department of Labor definition found at 20 C.F.R. 655.715 which states:

Employed, employed by the employer, or employment relationship means the employment relationship as determined under the common law, under which the key determinant is the putative employer's right to control the means and manner in which the work is performed. Under the common law, "no shorthand formula or magic phrase *** can be applied to find the answer * * *. [A]lL of the incidents of the relationship must be assessed and weighed with no one factor being decisive." NLRB v. United Ins. Co. of America, 390 U.S. 254,258 (1968).

____________________________________________

2 Nationwide Mutual Ins. Co. v. Darden, 503 U.S. 318, 322-323 (1992) (hereinafter Darden) and Clackamas Gastroenterology Assoc. v. Wells, 538 U.S.A40 (2003) (hereinafter Clackamas).

Memorandum for Service Center Directors

Subject: Determining Employer-Employee Relationship for Adjudication ofH-IB Petitions,

Including Third-Party Site Placements

Page 3

beneficiary will be working.3 In some situations, the location of the petitioner's business may

not be located in the same LCA jurisdiction as the place the beneficiary will be working.

III. Field Guidance

A. The Employer-Employee Relationship

An employer who seeks to sponsor a temporary worker in an H-IB specialty occupation is

required to establish a valid employer-employee relationship. USCIS has interpreted this term

to be the "conventional master-servant relationship as understood by common-law agency

doctrine.,,4 The common law test requires that all incidents of the relationship be assessed and

weighed with no one factor being decisive. The Supreme Court has stated:

we consider the hiring party's right to control the manner and means by which the

product is accomplished. Among the other factors relevant to this inquiry are the skill

required; the source of the instrumentalities and tools; the location of the work; the

duration of the relationship between the parties; whether the hiring party has the right to

assign additional projects 'to the hired party, the extent of the hired party's discretion

over when and how long to work; the method of payment; the hired party's role in hiring

and paying assistants,' whether the work is part of the regular business of the hiring

party; whether the hiring party is in business,' the provision of employee benefits; and the

tax treatment of the hired party.5

Therefore, 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 the payroll. In considering whether or not there is a valid "employer-employee relationship" for purposes of H-lB petition adjudication, USCIS must determine if the employer has a sufficient level of control over the employee. The petitioner must be able to establish that it has the right to control6 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) rf 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?

___________________________

3 See 20 C.F.R. 655.730(c)(4)(v), 20 C.F.R. 655.730(c)(5) and 20 C.F.R. 655.730(d)(l)(ii)

4 See Darden at 322-323.

5 See Darden at 323-324 (Emphasis added.)

6 The right to control the beneficiary is different from actual control. An employer may have the right to control the beneficiary's job-related duties and yet not exercise actual control over each function performed by that beneficiary. The employer-employee relationship hinges on the right to control the beneficiary

Memorandum for Service Center Directors

Subject: Determining Employer-Employee Relationship for Adjudication ofH-lB Petitions,

Including Third-Party Site Placements

Page 4

(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 fire 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?

The common law is flexible about how these factors are to be weighed. The petitioner will have

met the relationship 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. In assessing the requisite degree of control, the officer should be mindful of the nature of the petitioner's business and the type of work of the beneficiary. The petitioner must also be able to establish that the right to control the beneficiary's work will continue to exist throughout the duration of the beneficiary's employment term with the petitioner.

Valid employer-employee relationship would exist in the following scenarios:7

Traditional Employment

The beneficiary works at an office location owned/leased by the petitioner, the beneficiary

reports directly to the petitioner on a daily basis, the petitioner sets the work schedule of the

beneficiary, the beneficiary uses the petitioner's tools/instrumentalities to perform the duties

of employment, and the petitioner directly reviews the work-product of the beneficiary. The

petitioner claims the beneficiary for tax purposes and provides medical benefits to the

beneficiary.

[Exercise of Actual Control Scenario]

Temporary/Occasional Off-Site Employment

The petitioner is an accounting firm with numerous clients. The beneficiary is an accountant.

The beneficiary is required to travel to different client sites for auditing purposes. In

performing such audits, the beneficiary must use established firm practices. If the

beneficiary travels to an off-site location outside the geographic location of the employer to

7 These scenarios are meant to be illustrative examples and are not exhaustive. Officers may see a variety of situations and factors when reviewing an H-lB petition.

Memorandum for Service Center Directors

Subject: Determining Employer-Employee Relationship for Adjudication ofH-lB Petitions,

Including Third-Party Site Placements

Page 5

perform an audit, the petitioner provides food and lodging costs to the beneficiary. The

beneficiary reports to a centralized office when not performing audits for clients and has an

assigned office space. The beneficiary is paid by the petitioner and receives employee

benefits from the petitioner.

[Right to Control Scenario]

Long-Term/Permanent Off-Site Employment

The petitioner is an architectural firm and the beneficiary is an architect. The petitioner has a

contract with a client to build a structure in a location out of state from the petitioner's main

offices. The petitioner will place its architects and other staff at the off-site location while

the project is being completed. The contract between the petitioner and client states that the

petitioner will manage its employees at the off-site location. The petitioner provides the

instruments and tools used to complete the· project, the beneficiary reports directly to the

petitioner for assignments, and progress reviews of the beneficiary are completed by the

petitioner. The underlying contract states that the petitioner has the right to ultimate control

of the beneficiary's work.

[Right to Control Specified and Actual Control is Exercised]

Long Term Placement at a Third-Party Work Site

The petitioner is a computer software development company which has contracted with

another, unrelated company to develop an in-house computer program to track its

merchandise, using the petitioner's proprietary software and expertise. In order to complete

this project, petitioner has contracted to place software engineers at the client's main

warehouse where they will develop a computer system for the client using the petitioner's

software designs. The beneficiary is a software engineer who has been offered employment

to fulfill the needs of the contract in place between the petitioner and the client. The

beneficiary performs his duties at the client company's facility. While the beneficiary is at

the client company's facility, the beneficiary reports weekly to a manager who is employed

by the petitioner. The beneficiary is paid by the petitioner and receives employee benefits

from the petitioner.

[Right to Control Specified and Actual Control is Exercised]

The following scenarios would not present a valid employer-employee relationship:8

Self-Employed Beneficiaries

The petitioner is a fashion merchandising company that is owned by the beneficiary. The

beneficiary is a fashion analyst. The beneficiary is the sole operator, manager, and employee

______________________________________

8 These scenarios are meant to be illustrative examples and are not exhaustive. Officers may see a variety of situations and factors when reviewing an H-IB petition.

Memorandum for Service Center Directors

Subject: Determining Employer-Employee Relationship for Adjudication ofH-lB Petitions,

Including Third-Party Site Placements

Page 6

of the petitioning company. The beneficiary cannot be fired by the petitioning company.

There is no outside entity which can exercise control over the beneficiary.9 The petitioner

has not provided evidence that that the corporation, and not the beneficiary herself, will be

. 10 controlling her work.

[No Separation between Individual and Employing Entity; No Independent Control

Exercised and No Right to Control Exists]

Independent Contractors

The beneficiary ·is a sales representative. The petitioner is a company that designs and

manufactures skis. The beneficiary sells these skis for the petitioner and works on

commission. The beneficiary also sells skis for other companies that design and manufacture

skis that are independent of the petitioner. The petitioner does not claim the beneficiary as

an employee for tax purposes. The petitioner does not control when, where, or how the

beneficiary sells its or any other manufacturer's products. The petitioner does not set the

work schedule of the beneficiary and does not conduct performance reviews of the

beneficiary.

[Petitioner Has No Right to Control; No Exercise of Control]

Third-Party Placement/ "Job-Shop"

The petitioner is a computer consulting company. The petitioner has contracts with

numerous outside companies in which it supplies these companies with employees to fulfill

specific staffing needs. The specific positions are not outlined in the contract between the

petitioner and the third-party company but are staffed on an as-needed basis. The beneficiary

is a computer analyst. The beneficiary has been assigned to· work for the third-party

company to fill a core position to maintain the third-party company's payroll. Once placed at

__________________________________________

9 USCIS acknowledges that a sole stockholder of a corporation can be employed by that corporation as the corporation is a separate legal entity from its owners and even its sole owner. See Matter of Aphrodite, 17 I&N Dec. 530 (BIA 1980). However, an H-1B beneficiary/employee who owns a majority of the sponsoring entity and who reports to no one but him or herself may not be able to establish that a valid employment relationship exists in that the beneficiary, who is also the petitioner, cannot establish the requisite "control". See generally Administrator, Wage and Hour Division v. Avenue Dental Care, 6-LCA-29 (ALJ June 28,2007) at 20-21.

10 In the past, the Administrative Appeals Office (AAO) has issued a limited number of unpublished decisions that addressed whether a beneficiary may be "employed" by the petitioner even though she is the sole owner and operator of the enterprise. The unpublished decisions correctly determined that corporations are separate and distinct from their stockholders and that a corporation may petition for, and hire, their principal stockholders as H1B temporary employees. However, similar to the 1979 decision in Matter of Allan Gee, Inc., the AAO did not reach the question of how, or whether, petitioners must establish that such beneficiaries are bona fide "employees" of "United States employers" having an "employer-employee relationship." 17 I&N Dec. 296 (Reg. Comm. 1979).

While it is correct that a petitioner may employ and seek H-1 B classification for a beneficiary who happens to have a significant ownership interest in a petitioner, this does not automatically mean that the beneficiary is a bona fide employee. Starting in 2007, the AAO has utilized the criteria discussed in Nationwide Mutual Ins. Co. v. Darden, 503 U.S. 318,322-323 (l992) and Clackamas Gastroenterology Associates, P.e. v. Wells, 538 U.S. 440 (2003) to

reach this pivotal analysis.

Memorandum for Service Center Directors

Subject: Determining Employer-Employee Relationship for Adjudication ofH-IB Petitions,

Including Third-Party Site Placements

Page 7

the client company, the beneficiary reports to a manager who works for the third-party

company. The beneficiary does not report to the petitioner for work assignments, and all

work assignments are determined by the third-party company. The petitioner does not

control how the beneficiary will complete daily tasks, and no propriety information of the

petitioner is used by the beneficiary to complete any work assignments. The beneficiary's

end-product, the payroll, is not in any way related to the petitioner's line of business, which

is computer consulting. The beneficiary's progress reviews are completed by the client'

company, not the petitioner.

[Petitioner Has No Right to Control; No Exercise of Control].

The following is an example of a regulatory exception where the petitioner is not the

employer:

Agents as Petitioners (11)

The petitioner is a reputable modeling agency that books models for various modeling jobs at

different venues to include fashion houses and photo shoots. The beneficiary is a

distinguished runway model. The petitioner and beneficiary have a contract between one

another that includes such terms as to how the agency will advise, counsel, and promote the

model for fashion runway shows. The contract between the petitioner and beneficiary states

that the petitioner will receive a percentage of the beneficiary's fees when the beneficiary is

booked for a runway show. When the beneficiary is booked for a runway show, the

beneficiary can negotiate pay with the fashion house. The fashion house (actual employer)

controls when, where, and how the model will perform her duties while engaged in the

runway shows for the fashion house.

[Agent Has No Right to Control; Fashion House Has and Exercises Right to Control]

B. Documentation to Establish the Employer-Employee Relationship

Before approving H-1 B nonimmigrant visa petitions, "the director shall consider all the evidence submitted and such other evidence as he or she may independently require to assist his or her adjudication.,,12 In addition to all other regulatory requirements, including that the petitioner provide an LCA specific to each location where the beneficiary will be working, the petitioner must establish the employer-employee relationship described above. Such evidence should provide sufficient detail that the employer and beneficiary are engaged in a valid employer employee relationship. If it is determined that the employer will not have the right to control the

_____________________________________________

11 Under 8 C.F.R. 2I4.2(h)(2)(i)(F), it is also possible for an "agent" who may not be the actual employer of the HIB temporary employee to file a petition on behalf of the actual employer and the beneficiary. The beneficiary must be one who is traditionally self-employed or who uses agents to arrange short-term employment on their behalf with numerous employers. However, as discussed below, the fact that a petition is filed by an agent does not change the requirement that the end-employer have a valid employer-employee relationship with the beneficiary.

12 See 8 C.F.R. 214.2(h)(9)(i).

Memorandum for Service Center Directors

Subject: Determining Employer-Employee Relationship for Adjudication ofH-lB Petitions,

Including Third-Party Site Placements

Page 8

employee in the manner described below, the petition may be denied for failure of the employer to satisfy the requirements of being a United States employer under 8 C.F.R. 214.2(h)(4)(ii).

1. 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. 13 Lastly, the petitioner should be able to establish that the above elements will continue to exist throughout the duration of the requested H-IB validity period. The petitioner can demonstrate an employer employee relationship by providing a combination of the following or similar types of evidence:

o 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;

o Copy of signed Employment Agreement between the petitioner and beneficiary detailing

the terms and conditions of employment;

o Copy of an employment offer letter that clearly describes the nature of the employeremployee relationship and the services to be performed by the beneficiary;

o Copy of 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 work, 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 service to be provided, the location where 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 assistaIlts to be utilized by the

beneficiary, whether the work to be performed is paIt of the regular business of the

13 See 8 C.F.R. 214.2(h)(4)(ii).

Memorandum for Service Center Directors

Subject: Detennining Employer-Employee Relationship for Adjudication ofH-1B Petitions,

Including Third-Party Site Placements

Page 9

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 ofpetitioner's organizational chart, demonstrating beneficiary's ~upervisory

chain.

2. Extension Petitions14

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 the 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 ofthe beneficiary's payroll summaries and/or Fonn W-2s, evidencing wages paid

to the beneficiary during the period ofpreviously approved H-1B status;

CopyofTimeSheetsduringtheperiod ofpreviouslyapprovedH-1Bstatus;

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 ofhire, dates ofjob 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-1 B 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 it 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.

14 In this context, an extension petition refers to a petition filed by the same petitioner to extend H-IB status without

a material change in the terms of employment.

Memorandum for Service Center Directors

Subject: Determining Employer-Employee Relationship for Adjudication ofH-IB Petitions,

Including Third-Party Site Placements

Page 10

uscrs requests the documentation described above to increase H-IB program compliance and

curtail violations. As always, USCIS maintains the authority to do pre-or post-adjudication

compliance review site visits for either initial or extension petitions.

C. Request for Evidence to Establish Employer-Employee Relationship

uscrs 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 ~ervice

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-IB eligibility.

D. 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. .

IV. Use

This memorandum is intended solely for the training and guidance of USCIS personnel in

performing their duties relative to the adjudication of applications. It is not intended to, does not,

and may not be relied upon to create any right or benefit, substantive or procedural, enforceable

Memorandum for Service Center Directors

Subject: Determining Employer-Employee Relationship for Adjudication ofB-IB Petitions,

Including Third-Party Site Placements

Page 11

at law or by any individual or other party in removal proceedings, in litigation with the United

States, or in any other form or manner. .

V. Contact

Any questions regarding the. memorandum should be directed through appropriate supyrvisory

channels to the Business Employment Services Team in the Service Center Operations

Directorate.

AFM UPDATES

Accordingly, the AFM is revised as follows:

1. Section (g)(15) of Chapter 31.3 of the Officers Field Manual is added to read as

follows:

31.3 H-1 B Classification, and Documentary Requirements

***

(g) Adjudicative Issues

(15) Evidence of Employer-Employee Relationship

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 the payroll. In considering

whether or not there is a valid "employer-employee relationship" for purposes of H-1 B

petition adjudication, USCIS mU,st determine if the employer has a sufficient~

level of

control over the employee. The petitioner must be able to establish that it has the right

to control1 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 dayto-

day basis ifsuch control is required?

I The right to control the beneficiary is different from actual control. An employer may have the right to control the

beneficiary's job-related duties and yet not exercise actual control over each function perfOlwed by that beneficiary.

The employer-employee relationship hinges on the right to control the beneficiary.

Memorandum for Service Center Directors

Subject: Determining Employer-Employee Relationship for Adjudication ofH-1B Petitions,

Including Third-Party Site Placements

Page 12

(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 fire 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?c

(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?

The common law is' flexible about how these factors are to be weighed. The petitioner

will have met the relationship 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.

In assessing the requisite degree of control, the officer should be mindful of the nature

of the petitioner's business and the type of work of the beneficiary. The petitioner must

also be able to establish that the right to control the beneficiary's work will continue to

exist throughout the duration of the beneficiary's employment term with the petitioner.

Valid employer~employee

relationship would exist in the following scenarios:2

Traditional Employment

The beneficiary works at an office location owned/leased by the petitioner, the

beneficiary reports directly to the petitioner on a daily basis, the petitioner sets the

work schedule of the beneficiary, the beneficiary uses the petitioner's

tools/instrumentalities to perform the duties of employment, and the petitioner

directly reviews the work-product of the beneficiary. The petitioner claims the

beneficiary for tax purposes and provides medical benefits to the beneficiary.

[Exercise of Actual Control Scenario]

. Temporary/Occasional Off-Site Employment

The petitioner is an accounting firm with numerous clients. The beneficiary is an

accountant. The beneficiary is required to travel to different client sites for auditing

purposes. In performing such aUdits, the beneficiary must use established firm

practices. If the beneficiary travels to an off-site location outside the geographic

2 These scenarios are meant to be illustrative examples and are not exhaustive. Officers may see a variety of

situations and factors when reviewing an H-IB petition.

Memorandum for Service Center Directors

Subject: Determining Employer-Employee Relationship for Adjudication ofH-lB Petitions,

Including Third-Party Site Placements

Page 13

location of the employer to perform an audit, the petitioner provides food and lodging

costs to the beneficiary. The beneficiary reports to a centralized office when not

performing audits for clients and has an assigned office space. The beneficiary is

paid by the petitioner and receives employee benefits from the petitioner.

[Right to Control Scenario]

Long-Term/Permanent Off-Site Employment

The petitioner is an architectural firm and the beneficiary is an architect. The

petitioner has a contract with a client to build a structure in a location out of state

from the petitioner's main offices. The petitioner will place its architects and other

staff at the off-site location while the project is being completed. The contract

between the petitioner and client states that the petitioner will manage its employees

at the off-site location. The petitioner provides the instruments and tools used to

complete the project, the beneficiary reports directly to the petitioner for

assignments, and progress reviews of the beneficiary are completed by the

petitioner. The underlying contract states that the petitioner has the right to ultimate

control of the beneficiary's work.

[Right to Control Specified and Actual Control is Exercised]

Long Term Placement at a Third-Party Work Site

The petitioner is a computer software development company which has contracted

with another, unrelated company to develop an in-house computer program to track

its merchandise, using the petitioner's proprietary software and expertise. In order

to complete this project, petitioner has contracted to place software engineers 'at the

client's main warehouse where they will develop a computer system for the client

using the petitioner's software designs. The beneficiary is a software engineer who

has been offered employment to fulfill the needs of the contract in place between the

petitioner and the client. The beneficiary performs his duties at the client company's

facility. While the beneficiary is at the client company's facility, the beneficiary

reports weekly to a manager who is employed by the petitioner. The beneficiary is

paid by the petitioner and receives employee benefits from the petitioner.

[Right to Control Specified and Actual Control is Exercised]

The following scenarios would not present a valid employer-employee

relationship:3

Self-Employed Beneficiaries

3 These scenarios are meant to be illustrative examples and are not exhaustive. Officers may see a variety of

situations and factors when reviewing an H-IB petition.

Memorandum for Service Center Directors

Subject: Determining Employer-Employee Relationship for Adjudication ofH-lB Petitions,

Including Third-Party Site Placements

Page 14

The petitioner is a fashion merchandising company that is owned by the beneficiary.

The beneficiary is a fashion analyst. The beneficiary is the sole operator, manager,

and employee of the petitioning company. The beneficiary cannot be fired by the

petitioning company. There is no outside entity which can exercise control over the

beneficiary.4 The petitioner has not provided evidence that that the corporation, and

not the beneficiary herself, will be controlling her work.5

;-.::

[No Separation between Individual and Employing Entity; No Independent

Control Exercised and No Right to Control Exists]

Independent Contractors

The beneficiary is a sales representative. The petitioner is a company that designs

and manufactures skis. The beneficiary sells these skis for the petitioner and works

on commission. The beneficiary also sells skis for other companies that design and

manufacture skis that are independent of the petitioner. The petitioner does not

claim the beneficiary as an employee for tax purposes. The petitioner does not

control when, where, or how the beneficiary sells its or any other manufacturer's

products. The petitioner does not set the work schedule of the beneficiary and does

not conduct performance reviews of the beneficiary.

[Petitioner Has No Right to Control; No Exercise of Control]

Third-Party Placement! "Job-Shop"

The petitioner is a computer consulting company. The petitioner has contracts with

numerous outside companies in which it supplies these companies with employees

to fulfill specific staffing needs. The specific positions are not outlined in the contract

between the petitioner and the third-party company but are staffed on an as.-needed

basis. The beneficiary is a computer analyst. The beneficiary has been assigned to

work for the third-party company to fill a core position to maintain the third-party

company's payroll. Once placed at the client company, the beneficiary reports to a

4 uscrs acknowledges that a sole stockholder of a corporation can be employed by that corporation as the

corporation is a separate legal entity from its owners and even its sole owner. See Matter of Aphrodite, 17 r&N Dec.

530 (BrA 1980). However, an H-1B beneficiary/employee who owns a majority of the sponsoring entity and who

reports to no one but him or herself may not be able to establish that a valid employment relationship exists in that

the beneficiary, who is also the petitioner, cannot establish the requisite "control". See generally Administrator,

Wage and Hour Division v. Avenue Dental Care, 6-LCA-29 (ALJ June 28, 2007) at 20-21.

5 The Administrative Appeals Office (AAO) ofUSCrS has issued an unpublished decision on the issue of whether a

beneficiary may be "employed" by the petitioner even though she is the sole owner and operator of the enterprise.

The unpublished decisions of the AAO correctly determined that corporations are separate and distinct from their

stockholders and that a corporation may petition for, and hire, their principal stockholders as H-1B temporary

employees. However, the unpublished AAO decision did not address how, or whether, petitioners must establish

that such beneficiaries are bona fide "employees" of"United States employers" having an "employer-employee

relationship." The AAO decision did not reach this pivotal analysis and thus, while it is correct that a petitioner may

employ and seek H-1B classification for a beneficiary who happens to have a significant ownership interest in a

petitioner, this does not automatically mean that the beneficiary is a bona fide employee.

Memorandum for Service Center Directors

Subject: Determining Employer-Employee Relationship for Adjudication ofH-IB Petitions,

Including Third-Party Site Placements

Page 15

manager who works for the third-party company. The beneficiary does not report to

the petitioner for work assignments, and all work assignments are determined by the

third-party company. The petitioner does not control how the beneficiary will

complete daily tasks, and no propriety information of the petitioner is used by the

beneficiary to complete any work assignments. The beneficiary's end-pro9uct, the

payroll, is not in any way related to the petitioner's line of business, which is

. computer consulting. The beneficiary's progress reviews are completed by the

client company, not the petitioner.

[Petitioner Has No Right to Control; No Exercise of Control]

The following is an example of a regulatory exception where the petitioner is not

the employer:

Agents as Petitioners6

The petitioner is a reputable modeling agency that books models for various

modeling jobs at different venues to include fashion .houses and photo shoots. The

beneficiary is a distinguished runway model. The petitioner and beneficiary have a

contract between one another that includes such terms as to how the agency will

advise, counsel, and promote the model for fashion runway shows. The contract

between the petitioner and beneficiary states that the petitioner will receive a

percentage of the beneficiary's fees when the beneficiary is booked for a runway

show. When the beneficiary is booked for a runway show, the beneficiary can

negotiate pay with the fashion house. The fashion house (actual employer) controls

when, where, and how the model will perform her duties while engaged in the

runway shows for the fashion house. .

[Agent Has No Right to Control; Fashion House Has and ·Exercises Right to

Control] . ",J

B. Documentation to Establish the Employer-Employee Relationship

Before approving H-1 B nonimmigrant visa petitions, "the director shall consider all the

evidence submitted and such other evidence as he or she may independently require to

assist his or her adjudication."? In addition to all other regulatory requirements,

including that the petitioner provide an LeA specific to each location where the

beneficiary will be working, the petitioner must establish the employer-employee

relationship described above. Such evidence should provide sufficient detail that the

6 Under 8 C.F.R. 214.2(h)(2)(i)(F), it is also possible for an "agent" who may not be the actual employer of the H-

IBtemporaryemployeetofileapetitiononbehalf oftheactualemployerandthebeneficiary. Thebeneficiarymust

be one who is traditionally self-employed or who uses agents to arrange short-term employment on their

behalf with numerous employers. However, as discussed below, the fact that a petition is filed by an agent does

not change the requirement that the end-employer have a valid employer-employee relationship with the beneficiary.

7 8 C.F.R. 214.2(h)(9)(i)

Memorandum for Service Center Directors

Subject: Determining Employer-Employee Relationship for Adjudication ofH-1 B Petitions,

Including Third-Party Site Placements

Page 16

employer and beneficiary are engaged in a valid employer-employee relationship. If it is

determined that the employer will not have the right to control the employee in the

manner described below, the petition may be denied for failure of the employer to

satisfy the requirements of being a United States employer under 8 C.F.R.

214.2(h)(4)(ii).

1. 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.8 Lastly, the petitioner should be able to establish that the above

elements will continue to exist throughout the duration of the requested H-1 B validity

period. The petitioner can demonstrate an employer-employee relationship by providing

a combination of the following or similar types of evid~nce:

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 signed Employment Agreement between the petitioner and beneficiary

detailing the terms and conditions of employment;

Copy of an employment offer letter that clearly describes the nature of the

employer-employee relationship and the services to be performed by the

beneficiary;

Copy of 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 work, 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

8 See 8 C.F,R. 214.2(h)(4)(ii).

Memorandum for Service Center Directors

Subject: Determining Employer-Employee Relationship for Adjudication ofH-1B Petitions,

Including Third-Party Site Placements

Page 17

needed to perform the job, the product to be developed or the service to be

provided, the location where 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

\ ,I

petitioner's role in paying and hiring assistants to be· utilized by the bel\l.~ficiary,

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 petitioner's organizational chart, demonstrating beneficiary's supervisory

chain.

Extension Petitions9

An H-1 B petitioner seeking to extend H-1 B employment for a beneficiary must continue

to establish that a valid employer-employee relationship exists. The petitioner can do

so by providing evidence that the 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-1 B 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-1 B 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-1 B

status;

Copy of Time Sheets during the period of previously approved H-1 B status;

Copy of prior years' work schedules;

Documentary examples of work product created or produced by the beneficiary

for the past H-1 B validity period, (Le., 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

9 In this context, an extension petition refers to a petition filed by the same petitioner to extend H-l B status without

a material change in the terms of employment.

Memorandum for Service Center Directors

Subject: Determining Employer-Employee Relationship for Adjudication ofH-IB Petitions,

Including Third-Party Site Placements

Page 18

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 throu9h9ut the

initial approval period, or violated any other terms of its prior H-1 B petitr6n, 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 it 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.

USCIS requests the documentation described above to increase H-1 B program

compliance and curtail violations. As always, USCIS maintains the authority to do preor

post-adjudication compliance review site visits for either initial or extension petitions.

Request for Evidence 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 employeremployee

relationship exists) and be tailored to request specific illustrative types of

evidence from the petitioner that goes directly to what USCIS deems as ~eficient.

Officers should first carefully 'review all the evidence provided with the H-1 B 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 peti'tioner has failed to establish and

provide examples of documentation that could be provided to establish H-1 B eligibility.

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

Not only must a petitioner establish that a valid employer-employee rejationship exists

and will continue to exist throughout the validity period of the H-1 B 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

Memorandum for Service Center Directors

Subject: Determining Employer-Employee Relationship for Adjudication ofH-1B Petitions,

Including Third-Party Site Placements

Page 19

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 ,

.I _.

particular beneficiary, that the beneficiary is performing duties in a specialty occupation,

and that the beneficiary is not being "benched" without pay between assignments.

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