The January 8, 2010 USCIS memo on the subject of H1B “employer-employee” relationships has caused a great deal of unnecessary panic. For example, while this memo does not in any way deal I-140 immigrant preference petitions, many people have mistakenly concluded that it does. The memo is limited to H1B situations only and does not attempt to go beyond that subject.

The memo begins by citing the regulatory definition of an employer for H1B purposes. They begin by citing Immigration and Nationality Act Section 101(a)(15)(H)(i)(b) for the proposition that an H1B nonimmigrant is an otherwise qualifying foreign national:

“with respect to whom the Secretary of Labor determines and certifies to the Attorney General that the intending employer has filed with the Secretary an application under section 212(n)(1)” [an LCA]

Though not emphasized by the CIS memo, it is important to recognize that the statute implicitly requires the DOL to make the first determination as to whether the petitioner qualifies as an employer.

The CIS memo goes on to recite the regulatory definition of “employer” found in Title 8 of the Code of Federal Regulations (Immigration and Nationality):

214.2(h)(4)(ii) Definitions.

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.

The memo then proceeds to state that the USCIS relies on “common law” principals, as articulated in the holding by the United States Supreme Court in National Mutual Ins. Co. v. Darden, 503 U.S. 318, 322-323 (1992) and Clackamas Gastroenterology Assoc. v. Wells, 538 U.S. 440 (2003). The memo goes on to list a number of factors that they feel are appropriate to determine a bona fide employer-employee relationship. It is important that they note (a) this list is not exclusive; and, (b) no one factor is 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, l.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 CIS memo emphasizes that they are concerned with the “right to control” and cite these criteria as important factors to be considered. It is important to understand that the judicial decisions from which these factors are taken make it very clear that they should be viewed as a whole and that it is not essential for each to be present before an employer-employee relationship can be found. Hopefully, CIS adjudicators will understand this and not insist that each and every criterion be established before they will find a qualifying relationship.

Perhaps the most troubling aspect of the memo is the list of examples cited, beginning on page four. In particular, on pages six and seven, the following example is offered:

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 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].

We will deal with this specific example, and why it is demonstrably legally wrong in the next section of this article. Suffice it to say that they do not explain how they arrived at this conclusion or offer any legal authority in support of it. They have simply declared that “job shops” do not qualify as employers under the law and have left it at that.

The memo next turns to documentation of the employer-employee relationship. For initial petitions, it provides an illustrative list of documentation and states that the petitioner can establish an employer-employee relationship through a combination of the following or similar documents:

·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 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 assistants to be utilized by the beneficiary, whether the work to be performed is paIt 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.

This list is what the CIS requires today for a successful H1B petition. There is nothing new; this is what they have required for at least the last one year.

Moving on to extensions of previously approved petitions, again, they provide an illustrative list of evidence and state that the petitioner should establish “the right to control the work of the beneficiary” by provide a combination of the following or similar evidence:

• 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 of the beneficiary's payroll summaries and/or Form W-2s, evidencing wages paid to the beneficiary during the period of previously approved H-1B status;
• Copy of Time Sheets during the period of previously approved H-1B status;
• 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 of hire, dates of job changes, i.e. promotions, demotions, transfers, layoffs, and pay changes with effective dates.

The next section provides a bit of potential good news, but it is unlikely that field adjudicators will take notice of it, much less follow it. Section C provides that if the evidence in the records of the employer-employee relationship is uncertain, an adjudicator may issue a tailored (emphasis original) RFE to request additional, specific evidence. Such RFEs should explain which element the petitioner has failed to establish and provide examples of documentation that could be used to establish the missing element of proof.

As with all USCIS policy memos, this one does not achieve the status of “law” and is for field guidance only. It specifically states:

“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 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.”

In summary, the USCIS has finally articulated its position on the subject of employer-employee relationships. This memorandum does not contain any new information or criteria that have not already been articulated in requests for evidence issued over the past one year. What it does do, however, is recite the USCIS position and reasoning in a single document.

The reasoning of the USCIS is badly flawed. The law they cite is incomplete and does not support the position that they take. Indeed, as will be demonstrated conclusively in the next section of this article, “job shops” clearly qualify as “employers” under federal law – including specifically the legal authorities cited by the USCIS in support of its position.