H-1B Employers and Workers Face New Hurdles and More DHS Compliance Site Visits

In a recent guidance memo, U.S. Citizenship and Immigration Services (USCIS) has appreciably altered its definition of what constitutes a valid employer-employee relationship as it relates to H-1B workers and imposes new rules on the types of activities in which H-1B workers can engage. The memo will have a significant impact on certain new H-1B petitions as well as extensions.  

Under the new rules, many workers who are placed at third-party worksites will no longer qualify for H-1B visas as employees.  Nor will independent contractors, such as sales representatives. And, agents as petitioners will not be able to qualify as H-1B employers.  The memo also departs from long-standing precedent to conclude that persons with a substantial ownership interest in a petitioning company, in most cases, cannot qualify as a beneficiary of an H-1B visa.  This means that co-owners of a business may not be able to obtain an H-1B. The guidance memo also requires that the petitioner establish that the employer-employee relationship exists throughout the requested H-1B validity period.

Although USCIS advises that it will review a number of factors to determine whether a valid employer-employee relationship exists, the petitioner must establish its right to control the beneficiary’s employment, including the ability to hire, fire, supervise the beneficiary, and direct his work. 

Even if an employer-employee relationship is established under the terms of the memorandum, companies that place H-1B workers at client sites face onerous new requirements to document the scope of the services to be performed as well as the length of contracts for services with their clients.

These new requirements will govern extensions of previously approved H-1B petitions and employers may be asked to retroactively document compliance with the memorandum. Moreover, USCIS advises that the validity of the employer-employee relationship can be reviewed by USCIS during post-adjudication compliance review site visits. 

Presumably USCIS announced these changes to give affected employers and employees some notice before the filing of new H-1B petitions for the next fiscal year begins.  In just five weeks, on April 1, employers will be able to file new H-1B petitions for their professional employees who will commence work on October 1, 2010.   

Employers should take the time now to review whether they are maintaining valid employer-employee relationships as well as identify new hires in their workforce who will require a first-time H-1B visa. A review of company H-1B public access files also may be prudent to ensure that files are complete and in full compliance, especially in light of the Department of Homeland Security’s (DHS) stepped-up H-1B site visit enforcement efforts. (In the fall of 2009, DHS officials began compliance review visits to certain H-1B petitioner-employers.) DHS now has another reason to conduct such compliance site visits.

If you have any questions concerning these new policies and would like to know how they affect your company, please contact the attorneys at Zulkie Partners.