H1B Employer-Employee Relationship Rule
How the rule affects H1B visa sponsorship and filing this year
The U.S. Citizenship and Immigration Services (USCIS) implemented a rule that has great significance and restricts some types of Companies from hiring and sponsoring H1B workers and filing H1B visas.
This rule is currently in effect, and will remain in effect for future years.
The rule primarily restricts a
gencies and 'bodyshops'
that: hire and file H1B visa petitions for their employees, and then sub-contract their employee(s) out on projects where the work is performed off-site at their clients offices.
The rule addresses and governs the existence of an employer-employee relationship between an H1B-petitioning employer and the H1B worker - when the H1B employee's work is performed 'off-site'.
The new rule specifies how the USCIS will determine the existence of the required employer-employee relationship when processing H1B visa applications.
The USCIS processors are directed to weigh multiple factors when making the determination as to whether there is an employer-employee relationship. They must review whether the H1B employer (petitioner) directly supervises the H1B worker, and whether this supervision is performed on site or off site. If the work is performed offsite, then the method and frequency of supervision is taken into consideration. Another factor is whether the H1B employer has the right to control the H1B workers daily duties (if required). Other factors include whether the H1B employer provides the tools needed to perform the duties required, is responsible for evaluating the work performed, who provides employee benefits and claims the H1B worker for tax purposes, the use of proprietary information, and whether the end work product and result is directly linked to the H1B employers (petitioners) business. These are some of the main factors but there are eleven factors stated in the new rule / memorandum that the USCIS will take into close consideration, which are listed below.
Example of a 'Valid' Employer-Employee Relationship:
The new rule provides examples of what constitutes a valid employer-employee relationship. The simplest example is where there is traditional, onsite employment (where the H1B worker is employed directly at the end-client work site). This direct employment typically involves daily contact, work at the employer's offices, and use of the employer's equipment.
Example of a NON-Valid Employer Employee Relationship:
"Body Shop agencies / Sub-Contracting consulting firms" -
Restricted from filing
The most important example for IT consulting situations is "job-shop" or "Sub-Contracting" business practices. The USCIS does not consider that there is a valid employer-employee relationship if the H1B employer (petitioner) contracts with other companies (end clients) and subcontracts the employee to the end client to fill their staffing needs. The H1B worker reports to a manager who is an employee of the end client company. The H1B worker gets work assignments from the manager in the end client company rather than agency that petitioned for the H1B visa and employs the H1B worker. The H1B employer (petitioner) does not control the work schedule, and there is no proprietary information regarding the petitioner that is used in the process. The end product is not related to the petitioner's business of IT consulting, and reviews are completed by the end client. The petitioner does not have the right of control and does not exercise control. Accordingly, there is no employer-employee relationship in this example.
* for complete details about the H1B employer employee relationship rule, please read below:
Copy of the USCIS Employer-Employee Relationship Rule Memorandum
The memorandum is titled: "Determining Employer-Employee Relationship for Adjudication of H1B Petitions, Including Third-Party Site Placements: Additions to Officer's Field Manual (AFM) Chapter 31.3(g)(15)(AFM Update AD 10-24)."
The USCIS will look at a number of factors to determine whether a valid H1B employer-employee relationship exists. Hiring and Sponsoring an H1B worker is more than merely paying the wage or placing that person on the payroll. In considering whether or not there is a valid "H1B employer-employee relationship" for purposes of H1B petition adjudication, the USCIS must determine if the H1B Employer (sponsor company) has a sufficient level of control over the employee.
The USCIS has defined such a relationship to hinge on an H1B Employer's "Right to Control" the means and manner in which the work is performed.
The H1B Employer must be able to establish that it has the right to control over when, where, and how the beneficiary performs the job.
The USCIS will consider the following to make such a determination (with no one factor being decisive):
1. Does the H1B petitioner supervise the H1B employee / worker and is such supervision off-site or on-site?
2. If the supervision is off-site, how does the H1B 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 H1B worker on a day-to-day basis if such control is required?
4. Does the petitioner provide the tools or instrumentalities needed for the H1B worker to perform the duties of employment?
5. Does the petitioner hire, pay, and have the ability to fire the H1B employee?
6. Does the petitioner evaluate the work-product of the H1B worker, i.e. progress/performance reviews?
7. Does the petitioner claim the H1B employee for tax purposes?
8. Does the petitioner provide the H1B worker any type of employee benefits?
9. Does the H1B employee 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 H1B worker is accomplished?
Third Party Placement Does Not Qualify
The USCIS has clearly stated that the following example of "Third-Party Placement / Job Shop" does NOT evidence an employer-employee relationship because the H1B Employer neither has a Right to Control nor Exercise of Control over the employee:
"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 posjtion 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."
Documentation to Establish the H1B Employer-Employee Relationship
Per this new memorandum, H1B Employers must clearly show that an employer-employee relationship will exist between the employer and employee, and establish that the employer has the right to control the employee's work, including the ability to hire, fire and supervise the beneficiary. The petitioner must also be responsible for the overall direction of the beneficiary's work. Lastly, the H1B Employer should be able to establish that the above elements will continue to exist throughout the duration of the requested H1B validity period.
The petitioner can demonstrate an employer-employee relationship by providing a combination of the following or similar types of evidence:
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, venues, or locations where the services will be performed for the period of time requested;
2. Copy of signed Employment Agreement between the petitioner and beneficiary detailing the terms and conditions of employment;
3. 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. 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;
5. 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;
6. 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 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. Copy of petitioner's organizational chart, demonstrating beneficiary's supervisory chain.
If an H1B Employer is seeking to extend H1B employment for an employee, the H1B Employer must continue to establish that a valid employer-employee relationship exists. The H1B Employer can do so by providing evidence that it continues to have the right to control the work of the employee, as described above.
The H1B Employer may also include a combination of the following or similar evidence to document that it maintained a valid employer-employee relationship with the employee throughout the initial H1B visa status approval period:
1. Copies of the beneficiary's pay records (leave and earnings statements, and pay stubs, etc.) for the period of the previously approved H1B status;
2. Copies of the beneficiary's payroll summaries and/or Form W-2s, evidencing wages paid to the beneficiary during the period of previously approved H1B status;
3. Copy of Time Sheets during the period of previously approved H1B status;
4. Copy of prior years' work schedules;
5. Documentary examples of work product created or produced by the beneficiary for the past H1B 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;
6. Copy of dated performance review(s); and/or
7. 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.
If USCIS determines, while adjudicating the extension petition, that the petitioner failed to maintain a valid H1B employer-employee relationship with the beneficiary throughout the initial approval period, or violated any other terms of its prior H1B petition, the extension petition may be denied.
Questions & Answers For H1B employers and sponsoring companies:
Q: Does this memorandum change any of the requirements to establish eligibility for an H1B petition?
A: No. This memorandum does not change any of the requirements for an H1B petition. The H1B regulations currently require that a United States employer establish that it has an employer-employee relations with respect to the beneficiary, as indicated by the fact that it may hire, pay, fire, supervise or otherwise control the work of any such employee. In addition to demonstrating that a valid employer-employee relationship will exist between the petitioner and the beneficiary, the petitioner must continue to comply with all of the requirements for an H1B petition including:
- establishing that the beneficiary is coming to the United States temporarily to work in a specialty occupation;
- demonstrating that the beneficiary is qualified to perform services in the specialty occupation; and
- filing of a Labor Condition Application (LCA) specific to each location where the beneficiary will perform services.
Q: What factors does USCIS consider when evaluating the employer-employee relationship?
A: As stated in the memorandum, USCIS will evaluate whether the petitioner has the "right to control" the beneficiary's employment, such as when, where and how the beneficiary performs the job. Please see the memorandum in the links in the upper right hand of this page for a list of factors that USCIS will review when determining whether the petitioner has the right to control the beneficiary. Please note that no one factor is decisive and adjudicators will review the totality of the circumstances when making a determination as to whether the employer-employee relationship exists.
Q: What types of evidence can I provide to demonstrate that I have a valid employer-employee relationship with the beneficiary?
A: You may demonstrate that you have a valid employer-employee relationship with the beneficiary by submitting the types of evidence outlined in the memorandum or similar probative types of evidence.
Q: What if I cannot submit the evidence listed in the memorandum?
A: The documents listed in the memorandum are only examples of evidence that establish the petitioner's right to control the beneficiary's employment. Unless a document is required by the regulations, i.e. an itinerary, you may provide similarly probative documents. You may submit a combination of any documents that sufficiently establish that the required relationship between you and the beneficiary exists. You should explain how the documents you are providing establish the relationship. Adjudicators will review and weigh all the evidence submitted to determine whether a qualifying employer-employee relationship has been established.
Q: What if I receive or have received an RFE requesting that I submit a particular type of evidence and I do not have the exact type of document listed in the RFE?
A: If the type of evidence requested in the RFE is not a document that is required by regulations, you may submit other similar probative evidence that addresses the issue(s) raised in the RFE. You should explain how the documents you are providing address the deficiency(ies) raised in the RFE. Adjudicators will review and weigh all evidence based on the totality of the circumstances. Please note that you cannot submit similar evidence in place of documents required by regulation.
Q: Will my petition be denied if I cannot establish that the qualifying employer-employee relationship will exist?
A: If you do not initially provide sufficient evidence of an employer-employee relationship for the duration of the requested validity period, you may be given an opportunity to correct the deficiency in response to a request for evidence (RFE). Your petition will be denied if you do not provide sufficiently probative evidence that the qualifying employer-employee relationship will exist for any time period.
Q: What if I can only establish that the qualifying employer-employee relationship will exist for a portion of the requested validity period?
A: If you do not initially provide sufficient evidence of an employer-employee relationship for the duration of the requested validity period, you may be given an opportunity to correct the deficiency in response to a request for evidence (RFE). Your petition may still be approved if you provide evidence that a qualifying employer-employee relationship will exist for a portion of the requested validity period (as long as all other requirements are met), however, USCIS will limit a petition's validity to the time period of qualifying employment established by the evidence.
Q: What happens if I am filing a petition requesting a "Continuation of previously approved employment without change" or "Change in previously approved employment" and an extension of stay for the beneficiary in H1B classification, but I did not maintain a valid employer-employee relationship with the beneficiary during the validity of the previous petition?
A: Your extension petition will be denied if USCIS determines that you did not maintain a valid employer-employee relationship with the beneficiary throughout the validity period of the previous petition. The only exception is if there is a compelling reason to approve the new petition (e.g. you are able to demonstrate that you did not meet all of the terms and conditions through no fault of your own). Such exceptions would be limited and made on a case-by-case basis.
Q: What if I am filing a petition requesting a "Change of Employer" and an extension of stay for the beneficiary's H1B classification? Would my petition be adjudicated under the section of the memorandum that deals with extension petitions?
A: No. The section of the memorandum that covers extension petitions applies solely to petitions filed by the same employer to extend H-1B status without a material change in the original terms of employment. All other petitions will be adjudicated in accordance with the section of the memorandum that covers initial petitions.
Q: I am a petitioner who will be employing the beneficiary to perform services in more than one work location. Do I need to submit an itinerary in support of my petition?
A: Yes. You will need to submit a complete itinerary of services or engagements, as described in the memo, in order to comply with 8 CFR 214.2(h)(2)(i)(B) if you are employing the beneficiary to perform services in more than one work location. Furthermore, you must comply with Department of Labor regulations requiring that you file an LCA specific to each work location for the beneficiary.
Q: What happens if I do not submit evidence of the employer-employee relationship with my initial petition?
A: If you do not initially provide sufficient evidence of an employer-employee relationship for the duration of the requested validity period, you will be given an opportunity to correct the deficiency in response to a request for evidence (RFE). However, failure to provide this information with the initial submission will delay processing of your petition.