H1B Visa Lawyer – “Employee-Employer Relationship” in H-1B Petitions, how will the new rules impact contract jobs?

Since the recent Memo from USCIS re Employer Employee relationship, our office has been receiving anxious calls from employers and clients alike. U.S. Citizenship and Immigration Services (USCIS) issued in Janauary updated guidance to adjudication officers to clarify what constitutes a valid employer-employee relationship to qualify for the H-1B ‘specialty occupation’ classification. The memorandum clarifies such relationships, particularly as it pertains to independent contractors, self-employed beneficiaries, and beneficiaries placed at third-party worksites. The memorandum is titled: “Determining Employer-Employee Relationship for Adjudication of H-1B Petitions, Including Third-Party Site Placements.

The memo make it more difficult for staffing companies who hire professionals to work at third-party work locations to obtain H-1B visas on their behalf. The memo states that staffing companies must demonstrate that they “control” their employee’s daily tasks.

Moreover, the memo prevents corporations owned by a future H-1B beneficiary from submitting an H-1B petition on behalf of the beneficiary. The grounds for denial would be that the beneficiary rather than the petitioning company will be controlling the beneficiary’s work.

Given the economic climate, many companies rely on contract workers to supplement their work force. The new guidance limits the ability of some outside vendors to sponsor new foreign workers or extend the immigration status of their existing employees. The result will be delayed projects and some of those companies may have difficulty fulfilling their contractual obligations. Companies, including those that do not sponsor H-1B workers — should therefore consult with their outside vendors to deter­mine whether the new guidance will have business ramifications. Many companies, knowing that the new guidance may inhibit their ability to augment their work force on short notice, plan to sponsor additional H-1B workers in fiscal year 2011.

Though USCIS issued the guidance, companies should expect their H-1B workers to face additional scrutiny when they apply for a new visa with the U.S. Department of State or seek admission at a port-of-entry. In a recent advisory, U.S. Customs and Border Protection (CBP) warned attorneys that foreign workers should expect to be questioned about their employment in the United States and should carry documentation to establish their eligibility to work in the United States.

Employers must adapt and revise how they prepare and submit H-1B petitions. Any company that places H-1B workers at third-party work sites should consult with outside counsel regarding the new guidance. We will monitor the developments as the new H1B seasons progresses, and will update our readers on the impact of this Memo on new cases filed after April 1, 2010.