On January 13, 2010, the U.S. Citizenship and Immigration Services (USCIS) issued guidance that imposes enhanced evidentiary requirements on employers filing H-1B petitions. The memo discusses what evidence must accompany an H-1B petition to establish a valid employer-employee relationship. The guidance also addresses in what instances the H-1B visa is appropriate for foreign workers who will be placed at third-party client worksites. It also discusses if self-employed individuals, business owners, and independent contractors can continue to qualify for the H-1B.
The federal regulations governing the H-1B classification require that an employer establish that it has an employer-employee relationship with the beneficiary of a petition. The new memo provides guidance on how USCIS will evaluate if this relationship exists. The memo lists a variety of factors to be considered when evaluating the petitioner’s right to control the beneficiary, including the manner and extent to which the petitioner actually supervises the beneficiary; the petitioner’s right to control the beneficiary’s daily work and work product; and the petitioner’s right to hire, pay and fire the beneficiary. USCIS instructs its adjudicators to review the totality of the circumstances when making a final determination of whether the employer-employee relationship exists. The memo also requires that the petitioner establish that the right to control the beneficiary’s work will continue to exist throughout the duration of the beneficiary’s employment with the petitioner.
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The memo proceeds to provide several examples of employment relationships some of which satisfy the new criteria for documenting an employer-employee relationship and some which would be prohibited under the new guidance. In cases where an H-1B worker is placed at a third-party worksite, the petitioner must establish that the petitioner will have the right to ultimate control over the beneficiary’s work for the H-1B to be approved. In contrast, if the H-1B worker will be employed at a “job shop”/ third-party worksite where they will report to a manager of that third-party company and the petitioner will not retain control over the beneficiary’s work, the petition will be denied.
In cases where the H-1B beneficiary is self-employed or has an ownership interest in the petitioning entity, the memo states that the petition must demonstrate that the petitioning entity is distinct from the beneficiary such that the necessary employment relationship and control exists. USCIS warns applicants to expect greater scrutiny in cases where the H-1B beneficiary is also the petitioner and reports to no one but himself or herself. If there is no separation between the petitioning company and the beneficiary and no evidence that the business entity will control the H-1B’s work, the petition will be denied. In cases where the beneficiary is an independent contractor whose work will not be controlled by the petitioner, the USCIS takes the position that an employment relationship does not exist and the H-1B is not appropriate.
To establish the employer-employee relationships discussed in the memo, employers can expect that they will see an increase in the kinds of supporting documentation that they will need to provide with H-1B filings. All H-1B petitions will need to include evidence that the petitioner and the H-1B worker will have a valid employer-employee relationship and that the petitioner will have the right of control over the beneficiary’s work. This will be especially important in cases where the foreign national will work at client sites during the H-1B validity period. In these instances, the employer will need to document that they will retain the right to supervise, direct and review the H-1B beneficiary’s work and terminate their employment. Evidence to establish the employer-employee relationship can include:
-A complete itinerary of services or engagements that specifies the dates of each service or engagement, the name and address of the actual employer, and the names and address 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;
-Copies of employment letters that clearly describes the nature of the employer-employee relationship and the services to be performed by the beneficiary;
-Copies 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 detailed description of the duties the beneficiary will perform, the qualifications required to perform the job duties, and who will supervise the H-1B worker;
-A description of the performance review process; and/or
-A copy of the petitioner’s organizational chart, demonstrating the beneficiary’s supervisory chain.
The memo also notes that if the H-1B worker will be placed at multiple worksites during the course of the H-1B validity period, the employer will need to provide a complete itinerary of the worker’s engagements, including the dates of each engagement, the names and addresses of the actual employers, and the names and addresses of the locations where the worker will be placed. The memo also reminds employers that they must include labor condition applications (LCAs) certified by the Department of Labor for each employment location.
In the case of H-1B extensions, USCIS will review the petition to determine if the necessary employer-employee relationship existed during the initial H-1B status approval period and whether it will continue to exist for the extension. Evidence to document the ongoing relationship can include:
-Copes of the beneficiary’s pay records;
-Copies of the beneficiary’s payroll summaries and/ or Form W-2s;
-Copies of prior years’ work schedules;
-Documentary examples of work product created or produced by the beneficiary for the past H-1B validity period;
-Copies of dated performance reviews; and/ or
-Copies of any employment history records, including but not limited to, documentation showing dates 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.
Throughout the memo, the USCIS notes that the petitioner must establish the requisite employer-employee relationship throughout the requested validity period of the petition. Generally, USCIS has always approved extension requests for up to three years, even if the employer did not provide documentation to support the beneficiary’s activities for all three years. However, the tone of the memo implies that employers can expect that USCIS will only approve petitions for the period of time established by the supporting documentation. This may be problematic for many business that may not have contracts in place for employment that will occur a year or two down the line. These businesses may be required to file multiple H-1B extensions.
The memo makes clear that employers must adapt their practices for the preparation and submission of H-1B petitions. Those petitions that do not meet the requisite evidentiary requirements may be subject to Requests for Evidence. If you have further questions on the new agency guidance please contact your Klasko Law Attorney.