News - February 2010

H-1B Contractor Workers - Change in USCIS Policy

In a recent memorandum USCIS has stated what constitutes an employment relationship for purposes of filing H-1B petitions with the USCIS. 

As a result, many companies may now wish to assess whether or not H-1B or other nonimmigrant foreign workers employed through other companies are working at your worksites, and then review the new guidance to determine if there might be difficulty in extending the work authorization for these individuals.  Likewise, if a company sends employees to third-party worksites, it may wish to determine whether or not such placements might run afoul of the new guidance.  We note that USCIS has stated that it may re-open previously approved petitions to determine whether an employment relationship exists.

The new memo from Donald Neufeld, dated January 8, 2010, marks a significant change in agency policy.  Mr. Neufeld is the USCIS Associate Director of Service Center Operations.  The memorandum provides guidance to USCIS service center adjudicators for purposes of determining whether employment-based nonimmigrant petitions may be approved.  While the memo deals specifically with H-1B nonimmigrant petitions requesting temporary work authorization, we expect that the issues it identifies will be raised in adjudication of filings in other nonimmigrant as well as immigrant categories, also.

As a result of this memo, we expect that many individuals currently employed in H1-B classification by staffing companies here in the U.S. will encounter resistance from USCIS when their employers seek approval of petitions to extend their status, unless the employment relationship conforms to the new guidance.  Staffing companies will likely also have difficulty bringing many new workers to the U.S. based on H-1B visa petitions.

While the memorandum only gives guidance for approval of H-1B petitions, it is possible that the same issues may arise when the beneficiary of a previously approved petition applies for a new visa at a U.S. consulate. U.S. Customs and Border Protection also appears to have taken notice of the contractor issue, and has recently begun to question some H-1B workers returning from abroad at Newark Liberty Airport and a few others. We do not know at this time whether CBP will expand this practice to other ports of entry.

The Neufeld memo focuses on workers who are placed at worksites and who are not able to be supervised or controlled by the petitioning company.  It states that:

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-1B petition adjudication, USCIS must determine if the employer has a sufficient level of control over the employee.

The impact will likely be greatest on so called “job shops”, which bring foreign workers to the U.S. from abroad, then subcontract them to end users.  The memo states that in this type of situation it would likely not approve a petition requesting H-1B classification, whether for a new or existing employee, because the petitioner does not have the authority to exercise control over the workers.  The memo gives the following example of a situation where it would not approve an H-1B petition:

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 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].

Most U.S. employers will likely see this issue arise on a case-by-case basis, as staffing companies need to petition to extend H-1B status on behalf of their employees.  If USCIS denies a petition, the employer may request review, but in many of these cases the affected worker will need to leave the U.S. 

The new memo should not affect H-1B petitions where the employees are under the direct supervision and control of the petitioning employer. The memo also continues to recognize that H-1B classification is appropriate where employees will work on a long term project for their employer, even if placed at a third-party worksite:

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 Neufeld memorandum sets forth several factors that USCIS adjudicators are now instructed to evaluate for purposes of determining whether or not an employer employee relationship exists:

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 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?

Please contact us if you would like to learn more about the new memorandum or its application to the company.


(c) 2010 Leete, Kosto & Wizner, LLP   See related Disclaimer at