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Rami Fakhoury on IT Immigration

The Fight Book: Appendix V: The Neufeld Memorandum

Rating: 3 votes, 5.00 average.

Rami Fakhoury and Mark Levey


Copyright@2010 Fakhoury Law Group/ Rami Fakhoury


Appendix V


 


THE NEUFELD MEMO


 


U.S. Department of Homeland Security


U.S. Citizenship and Immigration Services


Service Center Operations Directorate.


 


Washington, DC


20529-2060


 


U.S. Citizenship and Immigration Services


HQ 70/6.2.8


 


JAN 08 2010


AD 10-24


 


Memorandum


TO:


Service Center Directors


FROM:


Donald Neufeld 


Associate Director, Service Centers


 


SUBJECT:


Determining Employer-Employee Relationship for Adjudication ofH-1B


Petitions, Including Third-Party Site Placements


Additions to Officer's Field Manual (AFM) Chapter 31.3(g)(15) (AFM Update


AD 10-24) /


 


I. Purpose


This memorandum is intended to provide guidance, in the context of H-1B-petitions, on the


requirement that a petitioner establish that an employer-employee relationship exists and will


continue to exist with the beneficiary throughout the duration of the requested H-1B validity


period.


.


II. Background


Section 101(a)(15)(H)(i)(b) of the Immigration and Nationality Act (INA) defines an H-1B


nonimmigrant as an alien:


 


who is coming temporarily to the United States to perform services.. .in a specialty"


occupation described in section 1184(i)(1)..., who meets the requirements of the


occupation specified in section 1184(i)(2)..., and with respect to whom the Secretary of


Labor determines and certifies...that the intending employer has filed with the Secretary


an application under 1182(n)(1).


 


The Code of Federal Regulations (C.F.R.) provides that a "United States employer" shall file an


[H-1B] petition. 8 C.F.R. 214.2(h)(2)(i)(A).


 


The term "United States employer", in turn, is defined at 8 C.F.R. 214.2(h)(4)(ii) as follows:


 


 


Memorandum for Service Center Directors


Subject: Determining Employer-Employee Relationship for Adjudication of H-IB Petitions,


Including Third-Party Site Placements


Page 2


 


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.


In support of an H-1 B petition, a petitioner must not only establish that the beneficiary is coming to the United States temporarily to work in a specialty occupation but the petitioner must also satisfy the requirement of being a U.S. employer by establishing that a valid employer-employee relationship exists between the U.S. employer and the beneficiary throughout the requested H-IB validity period. To date, USCIC has relied on common law principles1  and two leading Supreme Court cases in determining what constitutes an employer-employee relationship2


The lack of guidance clearly defining what constitutes a valid employer-employee relationship as required by 8 C.F.R. 214.2(h)(4)(ii) has raised problems, in particular, with independent contractors, self-employed beneficiaries, and beneficiaries placed at third-party worksites. The placement of the beneficiary/employee at a work site that is not operated by the petitioner/employer (third-party placement), which is common in some industries, generally makes it more difficult to assess whether the requisite employer-employee relationship exists and will continue to exist.


While some third-party placement arrangements meet the employer-employee relationship criteria, there are instances where the employer and beneficiary do not maintain such a relationship. Petitioner control over the beneficiary must be established when the beneficiary is placed into another employer's business, and expected to become a part of that business's regular operations. The requisite control may not exist in certain instances· when the petitioner's business is to provide its employees to fill vacancies in businesses that contract with the petitioner for personnel needs. Such placements are likely to require close review in order to determine if the required relationship exists.


Furthermore, USCIS must ensure that the employer is in compliance with the Department of Labor regulations requiring that a petitioner file an LCA specific to each location where the USCIS has also relied on the Department of Labor definition found at 20 C.F.R. 655.715 which states:


Employed, employed by the employer, or employment relationship means the employment relationship as determined under the common law, under which the key determinant is the putative employer's right to control the means and manner in  which the work is performed. Under the common law, "no shorthand formula or magic phrase *** can be applied to find the answer * * *. [A]lL of the incidents of the relationship must be assessed and weighed with no one factor being decisive." NLRB v. United Ins. Co. of America, 390 U.S. 254,258 (1968).


____________________________________________


2 Nationwide Mutual Ins. Co. v. Darden, 503 U.S. 318, 322-323 (1992) (hereinafter Darden) and Clackamas Gastroenterology Assoc. v. Wells, 538 U.S.A40 (2003) (hereinafter Clackamas).


 


 


Memorandum for Service Center Directors


Subject: Determining Employer-Employee Relationship for Adjudication ofH-IB Petitions,


Including Third-Party Site Placements


 


Page 3


 


beneficiary will be working.3 In some situations, the location of the petitioner's business may


not be located in the same LCA jurisdiction as the place the beneficiary will be working.


 


III. Field Guidance


A. The Employer-Employee Relationship


An employer who seeks to sponsor a temporary worker in an H-IB specialty occupation is


required to establish a valid employer-employee relationship. USCIS has interpreted this term


to be the "conventional master-servant relationship as understood by common-law agency


doctrine.,,4 The common law test requires that all incidents of the relationship be assessed and


weighed with no one factor being decisive. The Supreme Court has stated:


 


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.5


 


Therefore, USCIS must look at a number of factors to determine whether a valid employer employee relationship exists. Engaging a person to work in the United States is more than merely paying the wage or placing that person on the payroll. In considering whether or not there is a valid "employer-employee relationship" for purposes of H-lB petition adjudication, USCIS must determine if the employer has a sufficient level of control over the employee. The petitioner must be able to establish that it has the right to control6 over when, where, and how the beneficiary performs the job and USCIS will consider the following to make such a determination (with no one factor being decisive):


 


(1) Does the petitioner supervise the beneficiary and is such supervision off-site or on-site?


(2) rf 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?


___________________________


3 See 20 C.F.R. 655.730(c)(4)(v), 20 C.F.R. 655.730(c)(5) and 20 C.F.R. 655.730(d)(l)(ii)


4 See Darden at 322-323.


5 See Darden at 323-324 (Emphasis added.)


6 The right to control the beneficiary is different from actual control. An employer may have the right to control the beneficiary's job-related duties and yet not exercise actual control over each function performed by that beneficiary. The employer-employee relationship hinges on the right to control the beneficiary


 


 


Memorandum for Service Center Directors


Subject: Determining Employer-Employee Relationship for Adjudication ofH-lB Petitions,


Including Third-Party Site Placements


 


 


Page 4


 


(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?


(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 common law is flexible about how these factors are to be weighed. The petitioner will have


met the relationship test, if, in the totality of the circumstances, a petitioner is able to present


evidence to establish its right to control the beneficiary's employment. In assessing the requisite  degree of control, the officer should be mindful of the nature of the petitioner's business and the type of work of the beneficiary. The petitioner must also be able to establish that the right to control the beneficiary's work will continue to exist throughout the duration of the beneficiary's employment term with the petitioner.


 


Valid employer-employee relationship would exist in the following scenarios:7


 


Traditional Employment


 


The beneficiary works at an office location owned/leased by the petitioner, the beneficiary


reports directly to the petitioner on a daily basis, the petitioner sets the work schedule of the


beneficiary, the beneficiary uses the petitioner's tools/instrumentalities to perform the duties


of employment, and the petitioner directly reviews the work-product of the beneficiary. The


petitioner claims the beneficiary for tax purposes and provides medical benefits to the


beneficiary.


 


[Exercise of Actual Control Scenario]


 


Temporary/Occasional Off-Site Employment


 


The petitioner is an accounting firm with numerous clients. The beneficiary is an accountant.


The beneficiary is required to travel to different client sites for auditing purposes. In


performing such audits, the beneficiary must use established firm practices. If the


beneficiary travels to an off-site location outside the geographic location of the employer to


 


7 These scenarios are meant to be illustrative examples and are not exhaustive. Officers may see a variety of situations and factors when reviewing an H-lB petition.


 


 


Memorandum for Service Center Directors


Subject: Determining Employer-Employee Relationship for Adjudication ofH-lB Petitions,


Including Third-Party Site Placements


 


 


Page 5


 


perform an audit, the petitioner provides food and lodging costs to the beneficiary. The


beneficiary reports to a centralized office when not performing audits for clients and has an


assigned office space. The beneficiary is paid by the petitioner and receives employee


benefits from the petitioner.


 


[Right to Control Scenario]


 


Long-Term/Permanent Off-Site Employment


 


The petitioner is an architectural firm and the beneficiary is an architect. The petitioner has a


contract with a client to build a structure in a location out of state from the petitioner's main


offices. The petitioner will place its architects and other staff at the off-site location while


the project is being completed. The contract between the petitioner and client states that the


petitioner will manage its employees at the off-site location.  The petitioner provides the


instruments and tools used to complete the· project, the beneficiary reports directly to the


petitioner for assignments, and progress reviews of the beneficiary are completed by the


petitioner. The underlying contract states that the petitioner has the right to ultimate control


of the beneficiary's work.


 


[Right to Control Specified and Actual Control is Exercised]


 


Long Term Placement at a Third-Party Work Site


 


The petitioner is a computer software development company which has contracted with


another, unrelated company to develop an in-house computer program to track its


merchandise, using the petitioner's proprietary software and expertise. In order to complete


this project, petitioner has contracted to place software engineers at the client's main


warehouse where they will develop a computer system for the client using the petitioner's


software designs. The beneficiary is a software engineer who has been offered employment


to fulfill the needs of the contract in place between the petitioner and the client. The


beneficiary performs his duties at the client company's facility. While the beneficiary is at


the client company's facility, the beneficiary reports weekly to a manager who is employed


by the petitioner. The beneficiary is paid by the petitioner and receives employee benefits


from the petitioner.


 


[Right to Control Specified and Actual Control is Exercised]


 


The following scenarios would not present a valid employer-employee relationship:8


 


Self-Employed Beneficiaries


 


The petitioner is a fashion merchandising company that is owned by the beneficiary. The


beneficiary is a fashion analyst. The beneficiary is the sole operator, manager, and employee


______________________________________


8 These scenarios are meant to be illustrative examples and are not exhaustive. Officers may see a variety of situations and factors when reviewing an H-IB petition.


 


 


Memorandum for Service Center Directors


Subject: Determining Employer-Employee Relationship for Adjudication ofH-lB Petitions,


Including Third-Party Site Placements


 


 


Page 6


 


of the petitioning company. The beneficiary cannot be fired by the petitioning company.


There is no outside entity which can exercise control over the beneficiary.9 The petitioner


has not provided evidence that that the corporation, and not the beneficiary herself, will be


. 10 controlling her work.  


 


[No Separation between Individual and Employing Entity; No Independent Control


Exercised and No Right to Control Exists]


 


Independent Contractors


 


The beneficiary ·is a sales representative. The petitioner is a company that designs and


manufactures skis. The beneficiary sells these skis for the petitioner and works on


commission. The beneficiary also sells skis for other companies that design and manufacture


skis that are independent of the petitioner. The petitioner does not claim the beneficiary as


an employee for tax purposes. The petitioner does not control when, where, or how the


beneficiary sells its or any other manufacturer's products. The petitioner does not set the


work schedule of the beneficiary and does not conduct performance reviews of the


beneficiary.


[Petitioner Has No Right to Control; No Exercise of Control]


 


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


__________________________________________


9 USCIS acknowledges that a sole stockholder of a corporation can be employed by that corporation as the corporation is a separate legal entity from its owners and even its sole owner. See Matter of Aphrodite, 17 I&N Dec. 530 (BIA 1980). However, an H-1B beneficiary/employee who owns a majority of the sponsoring entity and who reports to no one but him or herself may not be able to establish that a valid employment relationship exists in that the beneficiary, who is also the petitioner, cannot establish the requisite "control". See generally Administrator, Wage and Hour Division v. Avenue Dental Care, 6-LCA-29 (ALJ June 28,2007) at 20-21.


10 In the past, the Administrative Appeals Office (AAO) has issued a limited number of unpublished decisions that addressed whether a beneficiary may be "employed" by the petitioner even though she is the sole owner and operator of the enterprise. The unpublished decisions correctly determined that corporations are separate and distinct from their stockholders and that a corporation may petition for, and hire, their principal stockholders as H1B temporary employees. However, similar to the 1979 decision in Matter of Allan Gee, Inc., the AAO did not reach the question of how, or whether, petitioners must establish that such beneficiaries are bona fide "employees" of "United States employers" having an "employer-employee relationship." 17 I&N Dec. 296 (Reg. Comm. 1979).


 


While it is correct that a petitioner may employ and seek H-1 B classification for a beneficiary who happens to have a significant ownership interest in a petitioner, this does not automatically mean that the beneficiary is a bona fide employee. Starting in 2007, the AAO has utilized the criteria discussed in Nationwide Mutual Ins. Co. v. Darden, 503 U.S. 318,322-323 (l992) and Clackamas Gastroenterology Associates, P.e. v. Wells, 538 U.S. 440 (2003) to


reach this pivotal analysis.


 


Memorandum for Service Center Directors


Subject: Determining Employer-Employee Relationship for Adjudication ofH-IB Petitions,


Including Third-Party Site Placements


 


 


Page 7


 


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].


 


The following is an example of a regulatory exception where the petitioner is not the


employer:


 


Agents as Petitioners (11)


 


The petitioner is a reputable modeling agency that books models for various modeling jobs at


different venues to include fashion houses and photo shoots. The beneficiary is a


distinguished runway model. The petitioner and beneficiary have a contract between one


another that includes such terms as to how the agency will advise, counsel, and promote the


model for fashion runway shows. The contract between the petitioner and beneficiary states


that the petitioner will receive a percentage of the beneficiary's fees when the beneficiary is


booked for a runway show. When the beneficiary is booked for a runway show, the


beneficiary can negotiate pay with the fashion house. The fashion house (actual employer)


controls when, where, and how the model will perform her duties while engaged in the


runway shows for the fashion house.


[Agent Has No Right to Control; Fashion House Has and Exercises Right to Control]


 


B. Documentation to Establish the Employer-Employee Relationship


Before approving H-1 B nonimmigrant visa petitions, "the director shall consider all the evidence submitted and such other evidence as he or she may independently require to assist his or her adjudication.,,12 In addition to all other regulatory requirements, including that the petitioner provide an LCA specific to each location where the beneficiary will be working, the petitioner must establish the employer-employee relationship described above. Such evidence should provide sufficient detail that the employer and beneficiary are engaged in a valid employer employee relationship. If it is determined that the employer will not have the right to control the


 


_____________________________________________


11 Under 8 C.F.R. 2I4.2(h)(2)(i)(F), it is also possible for an "agent" who may not be the actual employer of the HIB temporary employee to file a petition on behalf of the actual employer and the beneficiary. The beneficiary must be one who is traditionally self-employed or who uses agents to arrange short-term employment on their behalf with numerous employers. However, as discussed below, the fact that a petition is filed by an agent does not change the requirement that the end-employer have a valid employer-employee relationship with the beneficiary.


12 See 8 C.F.R. 214.2(h)(9)(i).


 


Memorandum for Service Center Directors


Subject: Determining Employer-Employee Relationship for Adjudication ofH-lB Petitions,


Including Third-Party Site Placements


 


Page 8


 


employee in the manner described below, the petition may be denied for failure of the employer to satisfy the requirements of being a United States employer under 8 C.F.R. 214.2(h)(4)(ii).


 


1. Initial Petition


The petitioner must clearly show that an employer-employee relationship will exist between the petitioner and beneficiary, and establish that the employer has the right to control the beneficiary'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. 13 Lastly, the petitioner should be able to establish that the above elements will continue to exist throughout the duration of the requested H-IB validity period. The petitioner can demonstrate an employer employee relationship by providing a combination of the following or similar types of evidence:


 


o  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;


o  Copy of signed Employment Agreement between the petitioner and beneficiary detailing


the terms and conditions of employment;


o  Copy of an employment offer letter that clearly describes the nature of the employeremployee relationship and the services to be performed by the beneficiary;


o  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;


o


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;


o


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 assistaIlts to be utilized by the


beneficiary, whether the work to be performed is paIt of the regular business of the


13 See 8 C.F.R. 214.2(h)(4)(ii).


 


 


 


Memorandum for Service Center Directors


Subject: Detennining Employer-Employee Relationship for Adjudication ofH-1B Petitions,


Including Third-Party Site Placements


 


 


Page 9


 


petitioner, the provision of employee benefits, and the tax treatment of the beneficiary in


relation to the petitioner;


 


o


A description of the performance review process; and/or


o


Copy ofpetitioner's organizational chart, demonstrating beneficiary's ~upervisory


chain.


'.


 


2. Extension Petitions14


An H-1B petitioner seeking to extend H-1B employment for a beneficiary must continue to


establish that a valid employer-employee relationship exists. The petitioner can do so by


providing evidence that the petitioner continues to have the right to control the work of the


beneficiary, as described above.


 


The petitioner may also include a combination of the following or similar evidence to document


that it maintained a valid employer-employee relationship with the beneficiary throughout the


initial H-1B status approval period:


 


o


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;


o


Copies ofthe beneficiary's payroll summaries and/or Fonn W-2s, evidencing wages paid


to the beneficiary during the period ofpreviously approved H-1B status;


o


CopyofTimeSheetsduringtheperiod ofpreviouslyapprovedH-1Bstatus;


o


Copy of prior years' work schedules;


o


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;


o


Copy of dated performance review(s); and/or


o


Copy of any employment history records, including but not limited to, documentation


showing date ofhire, dates ofjob 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 employer-employee relationship with the beneficiary throughout the initial


approval period, or violated any other terms of its prior H-1 B petition, the extension petition may


be denied unless there is a compelling reason to approve the new petition (e.g., the petitioner is


able to demonstrate that it did not meet all the terms and conditions through no fault of its own).


Such a limited exception will be made solely on a case-by-case basis.


 


14 In this context, an extension petition refers to a petition filed by the same petitioner to extend H-IB status without


a material change in the terms of employment.


 


 


 


Memorandum for Service Center Directors


Subject: Determining Employer-Employee Relationship for Adjudication ofH-IB Petitions,


Including Third-Party Site Placements


 


 


Page 10


 


uscrs requests the documentation described above to increase H-IB program compliance and


curtail violations. As always, USCIS maintains the authority to do pre-or post-adjudication


compliance review site visits for either initial or extension petitions.


 


C. Request for Evidence to Establish Employer-Employee Relationship


uscrs may issue a Request For Evidence (RFE) when USCIS believes that the petitioner has


 


.failed to establish eligibility for the benefit sought, including in cases where the petitioner has


failed to establish that a valid employer-employee relationship exists and will continue to exist


throughout the duration of the beneficiary's employment term with the employer: Such RFEs,


however, must specifically state what is at issue (e.g. the petitioner has failed to establish through


evidence that a valid employer-employee relationship exists) and be tailored to request specific


illustrative types of evidence from the petitioner that goes directly to what USCIS deems as


deficient. Officers should first carefully review all the evidence provided with the H-IB petition


to determine which required elements have not been sufficiently established by the petitioner.


The RFE should neither mandate that a specific type of evidence be provided, unless provided


for by regulations (e.g. an itinerary of ~ervice


dates and. locations), nor should it request


information that has already been provided in the petition. Officers should state what element


the petitioner has failed to establish and provide examples of documentation that could be


provided to establish H-IB eligibility.


 


D. Compliance with 8 C.F.R. 214.2(h)(2)(i)(B)


Not only must a petitioner establish that a valid employer-employee relationship exists and will


continue to exist throughout the validity period of the H-IB petition, the petitioner must continue


to comply with 8 C.F.R. 214.2(h)(2)(i)(B) when a beneficiary is to be placed at more than one


work location to perform services. To satisfy the requirements of 8 C.F.R. 214.2(h)(2)(i)(B), the


petitioner must submit 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. Compliance with 8 C.F.R. 214.2(h)(2)(i)(B) assists USCIS in


determining that the petitioner has concrete plans in place for a particular beneficiary, that the


beneficiary is performing duties in a specialty occupation, and that the beneficiary is not being


','benched" without pay between assignments. .


 


IV. Use


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


 


 


 


Memorandum for Service Center Directors


Subject: Determining Employer-Employee Relationship for Adjudication ofB-IB Petitions,


Including Third-Party Site Placements


 


 


Page 11


 


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. .


 


V. Contact


Any questions regarding the. memorandum should be directed through appropriate supyrvisory


 


channels to the Business Employment Services Team in the Service Center Operations


 


Directorate.


 


AFM UPDATES


 


Accordingly, the AFM is revised as follows:


 


1. Section (g)(15) of Chapter 31.3 of the Officers Field Manual is added to read as


follows:


31.3 H-1 B Classification, and Documentary Requirements


***


 


(g) Adjudicative Issues


(15) Evidence of Employer-Employee Relationship


USCIS must look at a number of factors to determine whether a valid employer


 


 


employee relationship exists. Engaging a person to work in the United States is more .


 


than merely paying the wage or placing that person on the payroll. In considering


whether or not there is a valid "employer-employee relationship" for purposes of H-1 B


petition adjudication, USCIS mU,st determine if the employer has a sufficient~


level of


control over the employee. The petitioner must be able to establish that it has the right


to control1 over when, where, and how the beneficiary performs the job and USCIS will


.consider the following to make such a determination (with no one factor being 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 dayto-


day basis ifsuch control is required?


I The right to control the beneficiary is different from actual control. An employer may have the right to control the


beneficiary's job-related duties and yet not exercise actual control over each function perfOlwed by that beneficiary.


The employer-employee relationship hinges on the right to control the beneficiary.


 


 


 


Memorandum for Service Center Directors


Subject: Determining Employer-Employee Relationship for Adjudication ofH-1B Petitions,


Including Third-Party Site Placements


 


Page 12


 


(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?c


(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 common law is' flexible about how these factors are to be weighed. The petitioner


will have met the relationship test, if, in the totality of the circumstances, a petitioner is


able to present evidence to establish its right to control the beneficiary's employment.


In assessing the requisite degree of control, the officer should be mindful of the nature


of the petitioner's business and the type of work of the beneficiary. The petitioner must


also be able to establish that the right to control the beneficiary's work will continue to


exist throughout the duration of the beneficiary's employment term with the petitioner.


 


Valid employer~employee


relationship would exist in the following scenarios:2


 


Traditional Employment


 


The beneficiary works at an office location owned/leased by the petitioner, the


beneficiary reports directly to the petitioner on a daily basis, the petitioner sets the


work schedule of the beneficiary, the beneficiary uses the petitioner's


tools/instrumentalities to perform the duties of employment, and the petitioner


directly reviews the work-product of the beneficiary. The petitioner claims the


beneficiary for tax purposes and provides medical benefits to the beneficiary.


 


[Exercise of Actual Control Scenario]


 


. Temporary/Occasional Off-Site Employment


 


The petitioner is an accounting firm with numerous clients. The beneficiary is an


accountant. The beneficiary is required to travel to different client sites for auditing


purposes. In performing such aUdits, the beneficiary must use established firm


practices. If the beneficiary travels to an off-site location outside the geographic


 


2 These scenarios are meant to be illustrative examples and are not exhaustive. Officers may see a variety of


situations and factors when reviewing an H-IB petition.


 


 


Memorandum for Service Center Directors


Subject: Determining Employer-Employee Relationship for Adjudication ofH-lB Petitions,


Including Third-Party Site Placements


 


 


Page 13


 


location of the employer to perform an audit, the petitioner provides food and lodging


costs to the beneficiary. The beneficiary reports to a centralized office when not


performing audits for clients and has an assigned office space. The beneficiary is


paid by the petitioner and receives employee benefits from the petitioner.


 


[Right to Control Scenario]


 


Long-Term/Permanent Off-Site Employment


 


The petitioner is an architectural firm and the beneficiary is an architect. The


petitioner has a contract with a client to build a structure in a location out of state


from the petitioner's main offices. The petitioner will place its architects and other


staff at the off-site location while the project is being completed. The contract


between the petitioner and client states that the petitioner will manage its employees


at the off-site location. The petitioner provides the instruments and tools used to


complete the project, the beneficiary reports directly to the petitioner for


assignments, and progress reviews of the beneficiary are completed by the


petitioner. The underlying contract states that the petitioner has the right to ultimate


control of the beneficiary's work.


 


[Right to Control Specified and Actual Control is Exercised]


 


Long Term Placement at a Third-Party Work Site


 


The petitioner is a computer software development company which has contracted


with another, unrelated company to develop an in-house computer program to track


its merchandise, using the petitioner's proprietary software and expertise. In order


to complete this project, petitioner has contracted to place software engineers 'at the


client's main warehouse where they will develop a computer system for the client


using the petitioner's software designs. The beneficiary is a software engineer who


has been offered employment to fulfill the needs of the contract in place between the


petitioner and the client. The beneficiary performs his duties at the client company's


facility. While the beneficiary is at the client company's facility, the beneficiary


reports weekly to a manager who is employed by the petitioner. The beneficiary is


paid by the petitioner and receives employee benefits from the petitioner.


 


[Right to Control Specified and Actual Control is Exercised]


 


The following scenarios would not present a valid employer-employee


relationship:3


 


Self-Employed Beneficiaries


 


3 These scenarios are meant to be illustrative examples and are not exhaustive. Officers may see a variety of


situations and factors when reviewing an H-IB petition.


 


 


 


Memorandum for Service Center Directors


Subject: Determining Employer-Employee Relationship for Adjudication ofH-lB Petitions,


Including Third-Party Site Placements


 


 


Page 14


 


The petitioner is a fashion merchandising company that is owned by the beneficiary.


The beneficiary is a fashion analyst. The beneficiary is the sole operator, manager,


and employee of the petitioning company. The beneficiary cannot be fired by the


petitioning company. There is no outside entity which can exercise control over the


beneficiary.4 The petitioner has not provided evidence that that the corporation, and


not the beneficiary herself, will be controlling her work.5


;-.::


 


[No Separation between Individual and Employing Entity; No Independent


Control Exercised and No Right to Control Exists]


 


Independent Contractors


 


The beneficiary is a sales representative. The petitioner is a company that designs


and manufactures skis. The beneficiary sells these skis for the petitioner and works


on commission. The beneficiary also sells skis for other companies that design and


manufacture skis that are independent of the petitioner. The petitioner does not


claim the beneficiary as an employee for tax purposes. The petitioner does not


control when, where, or how the beneficiary sells its or any other manufacturer's


products. The petitioner does not set the work schedule of the beneficiary and does


not conduct performance reviews of the beneficiary.


 


[Petitioner Has No Right to Control; No Exercise of Control]


 


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


 


4 uscrs acknowledges that a sole stockholder of a corporation can be employed by that corporation as the


corporation is a separate legal entity from its owners and even its sole owner. See Matter of Aphrodite, 17 r&N Dec.


530 (BrA 1980). However, an H-1B beneficiary/employee who owns a majority of the sponsoring entity and who


reports to no one but him or herself may not be able to establish that a valid employment relationship exists in that


the beneficiary, who is also the petitioner, cannot establish the requisite "control". See generally Administrator,


Wage and Hour Division v. Avenue Dental Care, 6-LCA-29 (ALJ June 28, 2007) at 20-21.


5 The Administrative Appeals Office (AAO) ofUSCrS has issued an unpublished decision on the issue of whether a


beneficiary may be "employed" by the petitioner even though she is the sole owner and operator of the enterprise.


The unpublished decisions of the AAO correctly determined that corporations are separate and distinct from their


stockholders and that a corporation may petition for, and hire, their principal stockholders as H-1B temporary


employees. However, the unpublished AAO decision did not address how, or whether, petitioners must establish


that such beneficiaries are bona fide "employees" of"United States employers" having an "employer-employee


relationship." The AAO decision did not reach this pivotal analysis and thus, while it is correct that a petitioner may


employ and seek H-1B classification for a beneficiary who happens to have a significant ownership interest in a


petitioner, this does not automatically mean that the beneficiary is a bona fide employee.


 


 


 


 


Memorandum for Service Center Directors


Subject: Determining Employer-Employee Relationship for Adjudication ofH-IB Petitions,


Including Third-Party Site Placements


 


 


Page 15


 


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-pro9uct, 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]


 


The following is an example of a regulatory exception where the petitioner is not


the employer:


 


Agents as Petitioners6


 


The petitioner is a reputable modeling agency that books models for various


modeling jobs at different venues to include fashion .houses and photo shoots. The


beneficiary is a distinguished runway model. The petitioner and beneficiary have a


contract between one another that includes such terms as to how the agency will


advise, counsel, and promote the model for fashion runway shows. The contract


between the petitioner and beneficiary states that the petitioner will receive a


percentage of the beneficiary's fees when the beneficiary is booked for a runway


show. When the beneficiary is booked for a runway show, the beneficiary can


negotiate pay with the fashion house. The fashion house (actual employer) controls


when, where, and how the model will perform her duties while engaged in the


runway shows for the fashion house. .


 


[Agent Has No Right to Control; Fashion House Has and ·Exercises Right to


Control] . ",J


 


B. Documentation to Establish the Employer-Employee Relationship


Before approving H-1 B nonimmigrant visa petitions, "the director shall consider all the


evidence submitted and such other evidence as he or she may independently require to


assist his or her adjudication."? In addition to all other regulatory requirements,


including that the petitioner provide an LeA specific to each location where the


beneficiary will be working, the petitioner must establish the employer-employee


relationship described above. Such evidence should provide sufficient detail that the


 


6 Under 8 C.F.R. 214.2(h)(2)(i)(F), it is also possible for an "agent" who may not be the actual employer of the H-


IBtemporaryemployeetofileapetitiononbehalf oftheactualemployerandthebeneficiary. Thebeneficiarymust


be one who is traditionally self-employed or who uses agents to arrange short-term employment on their


behalf with numerous employers. However, as discussed below, the fact that a petition is filed by an agent does


not change the requirement that the end-employer have a valid employer-employee relationship with the beneficiary.


7 8 C.F.R. 214.2(h)(9)(i)


 


 


 


 


Memorandum for Service Center Directors


 


Subject: Determining Employer-Employee Relationship for Adjudication ofH-1 B Petitions,


 


Including Third-Party Site Placements


 


Page 16


 


employer and beneficiary are engaged in a valid employer-employee relationship. If it is


determined that the employer will not have the right to control the employee in the


manner described below, the petition may be denied for failure of the employer to


satisfy the requirements of being a United States employer under 8 C.F.R.


214.2(h)(4)(ii).


 


1. Initial Petition


The petitioner must clearly show that an employer-employee relationship will exist


between the petitioner and beneficiary, and establish that the employer has the right to


control the beneficiary'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.8 Lastly, the petitioner should be able to establish that the above


elements will continue to exist throughout the duration of the requested H-1 B validity


period. The petitioner can demonstrate an employer-employee relationship by providing


a combination of the following or similar types of evid~nce:


 


 


 


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;


o


Copy of signed Employment Agreement between the petitioner and beneficiary


detailing the terms and conditions of employment;


o


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;


o


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;


o


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;


o


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


8 See 8 C.F,R. 214.2(h)(4)(ii).


 


 


 


 


Memorandum for Service Center Directors


Subject: Determining Employer-Employee Relationship for Adjudication ofH-1B Petitions,


Including Third-Party Site Placements


 


 


Page 17


 


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


 


\ ,I


 


petitioner's role in paying and hiring assistants to be· utilized by the bel\l.~ficiary,


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;


 


o


A description of the performance review process; and/or


o


Copy of petitioner's organizational chart, demonstrating beneficiary's supervisory


chain.


2.


Extension Petitions9


An H-1 B petitioner seeking to extend H-1 B employment for a beneficiary must continue


to establish that a valid employer-employee relationship exists. The petitioner can do


so by providing evidence that the petitioner continues to have the right to control the


work of the beneficiary, as described above. .


 


The petitioner may also include a combination of the following or similar evidence to


document that it maintained a valid employer-employee relationship with the beneficiary


throughout the initial H-1 B status approval period:


 


o


Copies of the beneficiary's pay records (leave and earnings statements, and pay


stubs, etc.) for the period of the previously approved H-1 B status;


o


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-1 B


status;


o


Copy of Time Sheets during the period of previously approved H-1 B status;


o


Copy of prior years' work schedules;


o


Documentary examples of work product created or produced by the beneficiary


for the past H-1 B validity period, (Le., 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;


o


Copy of dated performance review(s); and/or


9 In this context, an extension petition refers to a petition filed by the same petitioner to extend H-l B status without


a material change in the terms of employment.


 


 


 


 


Memorandum for Service Center Directors


 


Subject: Determining Employer-Employee Relationship for Adjudication ofH-IB Petitions,


 


Including Third-Party Site Placements


 


Page 18


 


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 employer-employee relationship with the beneficiary throu9h9ut the


initial approval period, or violated any other terms of its prior H-1 B petitr6n, the


extension petition may be denied unless there is a compelling reason to approve the


new petition (e.g., the petitioner is able to demonstrate that it did not meet all the terms


and conditions through no fault of its own). Such a limited exception will be made solely


on a case-by-case basis.


 


USCIS requests the documentation described above to increase H-1 B program


compliance and curtail violations. As always, USCIS maintains the authority to do preor


post-adjudication compliance review site visits for either initial or extension petitions.


 


C.


Request for Evidence to Establish Employer-Employee Relationship


USCIS may issue a Request For Evidence (RFE) when USCIS believes that the


petitioner has failed to establish eligibility for the benefit sought, including in cases


where the petitioner has failed to establish that a valid employer-employee relationship


exists and will continue to exist throughout the duration of the beneficiary's employment


term with the employer. Such RFEs, however, must specifically state what is at issue


 


(e.g. the petitioner has failed to establish through evidence that a valid employeremployee


relationship exists) and be tailored to request specific illustrative types of


evidence from the petitioner that goes directly to what USCIS deems as ~eficient.


Officers should first carefully 'review all the evidence provided with the H-1 B petition to


determine which required elements have not been sufficiently established by the


petitioner. The' RFE should neither mandate that a specific type of evidence be


provided, unless provided for' by regulations (e.g. an itinerary of service dates and


locations), nor should it request information that has already been provided in the


petition. Officers should state what element the peti'tioner has failed to establish and


provide examples of documentation that could be provided to establish H-1 B eligibility.


D.


Compliance with 8 C.F.R. 214.2(h)(2)(i)(B)


Not only must a petitioner establish that a valid employer-employee rejationship exists


and will continue to exist throughout the validity period of the H-1 B petition, the


petitioner must continue to comply with 8 C.F.R. 214.2(h)(2)(i)(B) when a beneficiary is


to be placed at more than one work location to perform services. To satisfy the


requirements of 8 C.F.R. 214.2(h)(2)(i)(B), the petitioner must submit a complete


 


Memorandum for Service Center Directors


 


Subject: Determining Employer-Employee Relationship for Adjudication ofH-1B Petitions,


 


Including Third-Party Site Placements


 


Page 19


 


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. Compliance with 8 C.F.R. 214.2(h)(2)(i)(B)


assists USCIS in determining that the petitioner has concrete plans in place for a ,


 


.I _.


 


particular beneficiary, that the beneficiary is performing duties in a specialty occupation,


and that the beneficiary is not being "benched" without pay between assignments.


 

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