It's no wonder many staffing and consulting firms find the H-1B regulations burdensome.  The regulations create difficult compliance issues that require sophisticated case management databases and clear communication between Human Resources departments and project engagement managers.  But it is possible to comply with the law and our clients comply because it's the right thing to do.

The H-1B regulations demand that when an H-1B worker moves to a worksite not listed in the Labor Condition Application (LCA) and H-1B petition, the employer must file a new H-1B "amending" the worker's status.  Department of Homeland Security considers a change of worksite a material change in employment.  And this is hardly a surprise because many of the H-1B program's US worker protections are worksite specific.  Because OES wage surveys cover counties (MSAs and PMSAs), H-1B workers working in a county outside the one listed on the LCA may be underpaid.  Worksite address-specific protections include posting the LCA to give US workers notice of the H-1B worker's salary range and prevailing wage, and paying the H-1B worker at least the mean actual wage measured by similiarly employed workers at that specific worksite.

Compliance is less expensive than many companies realize.  The government filing fee for an H-1B amendment for a business or IT consultant changing assignments is $325.  Our firm charges $500 in legal fees for this type of amendment and we also provide training and seminars to employers who wish to bring the amendment process in house to further reduce the cost (although this creates risks that the employer should consider very carefully).  At no extra charge, we provide our client HR managers with online access to reports listing all nonimmigrant employees, status and document expiration dates, and current worksite locations.  We can also quickly customize any reports our client HR departments need and make them available in the company's secured web portal at www.olender.pro.  Careful planning combined with these online tools makes it a snap for staffing companies and business and IT consulting firms to comply with the H-1B laws while moving employees where they need to go.

The Employment Relationship Affects H-1B Petitions

USCIS is giving staffing and consulting companies a very hard time right now.  But because we require our clients to comply with the law as a condition of representation, we have an enviable track record of H-1B approvals for staffing and consulting companies.  We require our clients to produce the necessary documents and we use a carefully crafted formula to anticipate Request for Evidence (RFE) issues relating to H-1B staffing and consulting positions before USCIS has actually issued an RFE.

A company must prove it is an "employer" to secure an H-1B petition for an employee.  As in the employment law context, the employer's designation of a worker as contractor, or employee is less important than the facts of the relationship which are defined by control.  US Citizenship and Immigration Services issued a memo on January 8, 2010 noting that it would not approve H-1B petitions unless filed by the "employer" as defined by case law addressing the employee-independent contractor question.  Determining Employer-Employee Relationship for Adjudication of H-1B Petitions, Including Third-Party Site Placements, Donald Neufeld, Jan 08, 2010, HQ 70/6.2.8 AD 10-24.

The Neufeld memo notes that INA 101(a)(15)(H)(i)(b) and 8 CFR 214.2(h)(2)(i)(A) both mention "employer" or "United States employer" that has an "employer-employee relationship" as the petitioner.  This memo has caused headaches for staffing and placement firms that do indeed pay payroll taxes, withhold income taxes, pay workers' compensation insurance and otherwise serve as employers except in some cases with regard to their control over the employee's work.  The Neufeld memo looks to two important US Supreme Court Cases that define the factors to consider in deciding whether a common law employer-employee relationship exist.  Those two cases are:

• Nationwide Mutual Ins. Co. v. Darden, 503 U.S. 318 (1992), and
• Clackmas Gastroenterology Assoc. v. Wells, 538 U.S. 440 (2003)

The United States Supreme Court noted in Darden:

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.

The January 8, 2010 Neufeld memo more or less inquires as the same factors in Darden.  USCIS now requires that the H-1B petitioner establish that it has the right to control over when, where and how the beneficiary performs the job and will consider the following factors (with no one factor being decisive) to determine employer control:

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 the 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 Neufeld memo then uses examples to classify employment into four types of acceptable employment:

• Traditional employment
• Temporary, or occasional off-site employment
• Long term, or permanent off-site employment
• Long term placement at a third-party work site

And three types of unacceptable employment:

• Self employed
• Independent contractors
• Third party placement "job shop"
• Agents as petitioners

How to Comply with the Neufeld H-1B Memo

The Neufeld memo requires a petitioning employer to supply the following documents to satisfy the employer-employee relationship:

1. 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, venue, or location where the services will be performed for the period of time requested;
2. A copy of the signed employment agreement between the petitioner and the beneficiary detailing the terms and conditions of employment;
3. A 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;
4. A copy of relevant portions of valid contracts between the petitioner and a client 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;
5. Copies of signed 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 owrk will actually be performed by the beneficiary, which provide information such as a detailed description of the job duties, the qualifications required to perform the job duties, wages paid, hours worked, benefits, a brief description of who will supervise the beneficiary and their duties, and any other related evidence;
6. A copy of a 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 used by the beneficiary, 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;
7. A description of the performance review process, and/or
8. A copy of petitioner's organizational chart demonstrating the beneficiary's supervisory chain.

Why Staffing and Consulting Companies Should Comply with the Law

Department of Homeland Security has radically increased its enforcement activities.  And companies that fail to comply with the law are feeling the pain.  Department of Homeland Security recently fined the clothing chain Abercrombie and Fitch more than $1 million for I-9 paperwork violations even though DHS confirmed that the company did not employ a single worker without authorization or unlawfully.  The fine was solely for failing to maintain proper record keeping systems.  See our article on this interesting case here.  It's likely H-1B violations will bring much higher fines and penalties, especially in cases involving the company's failure to amend for worksite changes where evidence indicates the actions were intentional.

Employers that fail to comply may also face lawsuits from employees who are injured as a result of willful compliance failures.  Most immigration law firms that lack in-house employment law expertise are unaware that H-1B employees may have a claim for damages against an employer that fails to properly manage the immigration process.  Few H-1B workers have brought claims, most likely because few H-1B workers and few employment lawyers are aware that workers in such situations have valid claims.  But in the two reported cases involve employer failures to adequately follow immigration procedures, employees have uniformly won their cases.  Our firm was involved in settling an H-1B worker's claim for $500,000 against a firm that appeared to have wilfully misrepresented to an employee the true status of his H-1B petition.

Please see our discussion of employee civil claims against employers for failing to competently or honestly manage the immigration process.  Please contact us if you have questions about how to limit your liability, or if you have questions about your employer's failure to adequately comply with the immigration laws regarding your employment.