By: Hasan Abdullah, Esq.

On January 8, 2010, Donald Neufeld, Associate Director of Service Center Operations, has released a guidance memo to USCIS Service Center Directors on adjudicating H-1B petitions. It specifically provides guidelines for service center directors to decide the issue of whether an “employer-employee” relationship exists when an employer files an H-1B petition.

The Donald Neufeld Memo has been a source of great concern to employment-based immigration lawyers and IT consulting companies across the country. The question is whether this memo will be a real tiger, or instead, a paper tiger that only appears threatening but is in fact harmless.

Right of Control is Emphasized

The memo states that USCIS has relied on common law principles and Supreme Court cases to determine what constitutes an employer-employee relationship. The specific case which this memo cites is “Nationwide Mutual Ins. Co. v. Darden, 503 US 318 (1992).” According to this case, an employer-employee relationship is established when considering a totality of circumstances, and lists the following factors:

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?
Does the petitioner provide the beneficiary any 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?

Attorneys have observed that most of the above criteria do not necessary apply to IT consulting companies since most IT consulting companies do not directly supervise the work of their employees. Furthermore, the workers usually implement the end-client’s tools, and proprietary information rather than anything that belongs to the IT consulting company.

The Memo Takes Direct Aim at IT Consulting Companies

After the memo provides the basic criteria to determine whether an employer-employee relationship exists, it then provides examples of situations that do and do not qualify a petitioner as an employer. The passage referring to “Third Party Placement/‘Job Shops’” is what is creating the most alarm. The passage specifically states that the following scenario is not a valid employer-employee relationship:

“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 manger 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 proprietary 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]

So it appears that USCIS has taken direct aim to limit H-1Bs from going to IT consulting company employees.

The Neufeld Memo Will Not Change How we File H-1B Petitions for IT Consulting Company – Agent Acting as Employer Alternative

The Neufeld memo specifically addresses situations where a “United States employer” is filing an H-1B petition, but there is an alternate track which practitioners may successfully use for H-1B petitions for IT consulting companies. This alternate track involves expressing that the IT consulting company is not a direct employer, but rather an “agent acting as an employer.”

The Neufeld memo seems to misguide the reader into thinking that only direct employers may file H-1B petitions. However, the H-1B regulation, 8 CRF 214(h)(2)(i)(F) specifically states that “A United States agent may file a petition in cases involving workers who are traditionally self-employed or workers who use agents to arrange short-term employment on their behalf with numerous employers.” Furthermore, the petition filed by an agent performing the function of an employer must “guarantee wages and other terms and conditions of employment by contractual agreement with the beneficiary of the petition… (and) provide an itinerary of definite employment… (and) in questionable cases, a contract between the employers and the beneficiary may be required.”

In IT consulting company H-1B petitions, we have always expressed that employees placed at an end client location are working for an “agent performing the function of an employer.” As the regulations demand, we provide detailed itineraries of service and proof that wages and terms of employment are guaranteed by the petitioner, in addition to contracts between the employers and the beneficiary, or at least letters from the end-client confirming the employment relationship.

Conclusion

Only time will tell how this memo will be applied in practice. It could be possible that USCIS will abuse its discretion against IT consulting company petitions, even in petitions that clearly establish that the employer is an agent acting as an employer. But any time USCIS abuses its discretion, there will be a landslide of appeals. There is likelihood that it will not be “the end of the world” for IT consulting companies seeking to employ H-1B workers, and that the memo is indeed merely a paper tiger.