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Rami Fakhoury on IT Immigration

The Fight Book: Chapter I- H1B: Part C

Rating: 19 votes, 4.79 average.

Rami Fakhoury and Mark Levey


Copyright@2010 Fakhoury Law Group/ Rami Fakhoury


 


I.  H-1B


C.  LEGAL AUTHORITIES


Supreme Court Cases


 


U.S. Courts of Appeal Cases


 


U.S. District Court Cases


 


Administrative Appeals Office Precedent Decs. (AAO)


 


Other AAO Decs.


 


Board of Immigration Appeals Precedent Decs. (BIA)


 


Other BIA Decs.


 


USCIS/INS Commissioner Opinions & Related


 


Legal Publications


 


Other Publications


II. H-1B


D.  LEGAL ISSUES


 


USCIS Abandons a Statutory Basis for H-1B Adjudications -  The Long, Strange Trip From Defensor, to Neufeld, to Common Law to . . .?


 


1.  BACKGROUND - Defensor Issues and Related Litigation Points:  Unlawful RFEs, Delayed Adjudications, Prejudicial Denials


 


Shortly after DHS took over legacy INS, examiners at USCIS Service Centers expanded the practice of issuing denials and Requests For Evidence (RFEs) in H-1B cases citing a Fifth Circuit case, Defensor v Meissner (2000, CA5 Miss) 201 F3d 384.


That panel decision, rendered about a Mississippi nurse placement agency, reached the overly-broad conclusion that employers in outsourcing industries are not "true employers" but are merely "token employers," and thus companies that place their staff at client sites cannot sponsor H-1B workers based upon their own job requirements. 


This has, in turn, been taken by USCIS to justify imposition of excessive evidentiary burdens on outsourcing companies, particularly a requirement that consulting firms provide a copy of contracts with third-party clients and other normally privileged information to prove that the consulting work that will be done is professional in nature.  Quite predictably, in many cases, companies and their third-party clients sensing potential compliance risks, refuse to produce such documents.  The entirely foreseeable result has been a dramatic decline in the number of petitions for this type of case filed and approved in recent years.   The dicta laid out in Defensor related to evidentiary demands have been carried over without substantial change into the more recent Neufeld memo, and parties that were aggrieved by RFE and denials citing Defensor may still proceed despite the issuance of Neufeld, which carries  no more legal weight and is not a published regulation.  In fact, as has been noted above in the Introduction, release of the memo actually makes the procedural burden of establishing an APA action easier for potential litigants.    Regardless of which dicta has been cited in an adverse USCIS decision, Defensor needs to be reviewed in depth in order to understand the legally flawed basis of the Neufeld  directives.  The Defensor decision and Neufeld memo are attached in the Appendices.


The following section, immediately below, may be most useful to those petitioners who have received RFEs or denials that cite Defensor in formulating responses or appeals.  These materials may also serve as a model for proactively application in cover letters briefing anticipated issues filed with petitions. 


With minor variations in wording, USCIS and the AAO issued thousands of RFEs and denials that incorporate language similar to the following:


 


2.  Sample  RFE Extract 1.


the AAO notes that as recognized by the court in Defensor v Meissner, 201 F. 3d 384, where the work is to be performed for entities other than the petitioner, evidence of the client companies' job requirements is critical. The court held that the legacy Immigration and Naturalization Service had reasonably interpreted the statute and regulations as requiring the petitioner to produce evidence that a proffered position qualifies as a specialty occupation on the basis of the requirements imposed by the entities using the beneficiary's services. Such evidence must be sufficiently detailed and explained as to demonstrate the type and educational level of highly specialized knowledge in a specific discipline that is necessary to perform that particular work. The record of proceedings lacks such substantive evidence form any end-user entities that may generate work for the beneficiary and whose business needs would ultimately determine what the beneficiary would actually do on a day-to-day basis. In short, as noted by director, the petitioner has failed to establish the existence of H-1B caliber work for the beneficiary.


  3.  RFE Misinterprets the "U.S. Employer" Requirement (8 CFR 214.2(h)(4)(ii)) The requirements for establishing eligibility as an H-1B petitioner under the regulations are simple.   The basic requirements state that the H-1B petitioner must be a "United States employer" and the position offered must be a "specialty occupation."   Contrary to the Defensor interpretation, there is nothing intrinsic to the consulting firm relationship with its own employees and its clients that is contrary to the regulatory definition of "U.S. employer."    In order to answer an RFE citing Defensor, the petitioner must establish that it has met fully met the regulatory requirements as a U.S. employer.


The petitioner may argue along lines shown below [NOTE: the following section,  DEALING WITH DENIALS, extracts a model response to an RFE or a model appeal to the AAO, and may be used for either purpose.  This introductory section may also be adapted, with some minor changes in language, as part of a cover letter in an initial filing]:


 


________________________________________________________________________


4.  DEALING WITH DENIALS


SAMPLE RESPONSE TO RFE OR APPEAL TO AAO (U.S. Employer Requirement)


NOTE:  Sections in red, below, are to be completed or omitted, as both needed and relevant, to individualized responses.


 


APPLICABLE REGULATION


 


Chapter 8, Section 214.2(h)(4)(ii) of the Code of Federal Regulations (CFR) defines a United States employer for H-1B purposes.  8 CFR 214.2(h)(4)(ii) as follows:


 


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 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. [emphasis added]


 


 


ARGUMENT


 



  1. Petitioner clearly meets the elements of the definition of "employer" under 8 CFR 214.2(h)(4)(ii).  The USCIS has not applied the facts of the case to the correct definition of employer as required  under the regulation


 


Petitioner clearly meets the definition of 'employer' under CFR 214.2(h)(4)(ii).  The USCIS examiner has not correctly applied the facts of the case to the elements listed in the regulation.  The Petitioner, a business entity registered with the State of ___________, and with a main office located at ADDRESS                           , has engaged the Beneficiary to work in the United States, and has formally hired the Beneficiary, as evident by the employment agreement signed by the Petitioner and the Beneficiary on DATE____________. (EXHIBIT ___#) This clearly shows an offer of employment by the Petitioner to the Beneficiary was, in fact, made.  The employment agreement specifically states in paragraph ______(#): 


 










"...we would like to affirm that NAME OF PETITIONING FIRM ______ is the employer and is responsible for hiring, paying, firing, and will both supervise and control the work you do.  The employer reserves the right to assign you to additional work sites, and will continue to control the terms of your employment and the duties to which you will be assigned" [EXAMPLE ONLY]


Paragraph _______(#) of the employment agreement states the following:


                "...I'm pleased to confirm offer of employment to you to join NAME OF PETITIONING FIRM ______, as a  JOB TITLE                ." [EXAMPLE ONLY]


                Paragraph ________ (#) of the employment agreement states the following: 


"Your starting salary will be $________ per year, which along with such benefits as are specified in this agreement, will be paid by the employer.


 


 


"Your starting salary will be $___


 


"Your starting salary will be $________ per year." [EXAMPLE ONLY]


 




With respect to the third element that must be met in order to meet the definition of "employer" under the regulation, Petitioner does have a Federal Tax Identification number.  Petitioner's Federal Tax identification number is __________________.  Therefore, Petitioner has met the third and final element.


In summary, Petitioner has shown that it has hired the Beneficiary, has authority to terminate the Beneficiary's employment, has ongoing authority to assign work/duties to the Beneficiary, and will pay the Beneficiary. Based on all of these factors (i.e., hire, pay, assign duties, assign worksites, terminate employment), as well as the fact the Petitioner has a valid federal tax identification number, and the volume of documentation already submitted to the USCIS (i.e., federal tax return, quarterly wage reports, W-2's/W-3's, etc.), [EXAMPLE ONLY], the Petitioner has clearly shown by relevant, probative and credible evidence it is a bona fide employer, that has ongoing contractual control over the Beneficiary, regardless of the possibility of any outside work-related assignments, meeting the definition of "employer" under the regulation.


The employment contract between the petitioner and beneficiary are attached as Exhibit 1 in the Employer's response to this RFE, and was previously submitted.   The paramount issue under the common law is that the record contains a valid contract.  Please note that this contract contains an exclusivity clause, a "No Compete" agreement, that forbids either party from any employment or agency with regard to third-parties.  Under the Law of Contracts, a valid contract is presumed to exclude the interests of any Third-Parties, thus the beneficiary may not be legally or in fact employed by any other entity than the petitioner during the validity of this contact, which is open-ended and still in force.


The examiner's failure to apply all the elements under 8 CFR 214.2(h)(ii) to the facts of the case to determine if an employer-employee relationship exists is clear.  The examiner has misread the second element under the regulation and even appears to have added some new language and emphasis to the definition perhaps narrowing the definition of "employer" to the point that employers (i.e., contractors), who may assign an employee to perform services at a location other than its own business premises, are precluded from the definition.  The examiner must discuss why the element of contractual control might not extend to assignments off-premises, or to what degree that may have relevance to the Service's determination of what constitutes a bona fide employer-employee relationship.  No reason is given by the Service for its assumption that contractual control over employees must end at the firm's own office door.  The Fifth Circuit case cited in the decision is similarly mute on that issue, as shown below.  Absent such an explanation, no rational basis exists for this denial and those like it.



 



 


 


5.  "Specialty Occupation" of the Work Performed at Client Sites - Ongoing Control over Employment


 


A related issue that arises is establishing that the ongoing work to be performed by H-1B employees at client sites will be professional in nature, and consistently professional for the full period of validity of the petition.  The following section suggests language that addressed that may be used to proactively address that potential issue:



 



 


The petitioner is in full compliance with regulations regarding filing of amended petitions for material change in employment if that was entailed in placement of workers at off-site locations. [PLEASE NOTE: THIS SECTION HAS LIMITED APPLICABILITY TO COMPANIES THAT HAVE NO SIGNIFICANT HISTORY OF SERIOUS PAST COMPLIANCE ISSUES, PARTICULARLY RELATED TO OUTSIDE ASSIGNMENTS OF ITS H-1B WORKERS]


 


Under no circumstance would or could the petitioner assign the beneficiary to off-site employment for longer than short-term temporary duties without filing a new LCA for that site along with an amended petition if that entailed material change in employment.  The petitioner recognizes and abides by that rule.  Whether filing an amended petition is required by the original employer depends upon the period of time the worker will be assigned off-site.


 


The general rule is as follows:


Short Term Placement--20 C.F.R. 655.735(c). An H-1B in the U.S. under an LCA may be sent to a new worksite which is not covered by an LCA in the occupation but only up to a maximum of 30 days each year and up to 60 days each year if the H-1B spends substantial time at a permanent worksite, if s/he continues to maintain an office or work station at the permanent worksite and if her U.S. residence or place of abode is located in the area of the permanent worksitehttp://www.dol.gov/dol/allcfr/title_20/Part_655/20CFR655.735.htm

 


That section of CRF imposes further conditions on such short-term assignments, as follows:


 


(2) The employer shall not place, assign, lease, or otherwise contract out any H-1B nonimmigrant(s) to any worksite where there is a strike or lockout in the course of a labor dispute in the same occupational classification(s) as that of the H-1B nonimmigrant(s).


(3) For every day the H-1B nonimmigrant(s) is placed or assigned outside the area(s) of employment listed on the approved LCA(s) for such worker(s), the employer shall:


(i) Continue to pay such worker(s) the required wage (based on the prevailing wage at such worker's(s') permanent worksite, or the employer's actual wage, whichever is higher);


(ii) Pay such worker(s) the actual cost of lodging (for both workdays and non-workdays); and


(iii) Pay such worker(s) the actual cost of travel, meals and incidental or miscellaneous expenses (for both workdays and non-workdays).


 


ROVING EMPLOYEE - The regulations also provide for a type of H-1B employee whose work is "peripatetic" (roving) in nature, in that the normal duties of the occupation require frequent travel.


20 CFR 655.17. "Peripatetic" is included under the definition of "place of employment."


Peripatetic workers may travel constantly, but may not spend more than five days in one place. For such peripatetic workers, a new location is not considered a new "worksite," and therefore does not require a new LCA.


Similarly, H-1B workers who travel occasionally on a casual short-term basis (not exceeding 10 days) to a new location are not considered to have a new worksite with new LCA requirements. Id. This type of situation is also covered under the "place of employment" definition.  


Although in these cases, the employer is not required to take one of the three steps above to maintain compliance, the employer is required to pay travel expenses for each day the H-1B employee is traveling (both weekdays and weekends).


20 CFR 655.735(b)(3).


The short-term placement rules permit an H-1B worker to travel up to 30 or 60 days per year to another "place of employment." However, the employer may not use the short-term placement rules in any area of employment for which the employer has a certified LCA for the occupational classification. If the employer has such a certified LCA with an open slot, then the employer must use that and add a copy of that LCA to the employee's public access file. If the employer has a certified LCA, but it doesn't have any open slots, then the employer must file a new LCA.  


20 CFR 655.735(e) and (f).


The regulations specifically prohibit employers from continuously rotating H-1B employees to short-term placements in a manner that would defeat the stated purpose of these rules to give employers flexibility and enough time to file a new LCA.


The petitioner


20 CFR 655.735.


again acknowledges its responsibility to file an amended H petition if there is any material change in employment, and reaffirms the company is in compliance with the regulations in this regard.


 


 


________________________________________________________________________


 


6.  Inappropriate Application by DHS of Dicta Read Into Defensor Decision as "De Facto Rule or Binding Norm" in Adjudications of H-1B Petitions


 


A third issue to raise is that dicta read into the Defensor decision has been misapplied by the agency as a "de facto rule or binding norm" without meeting the publication and comment requirements of the Administrative Procedure Act (APA).   Other sections in this book deal with the topic of de facto rules and binding norms at length, and those arguments may be applied in a brief -- the section below introduces several related topics that might appear in a written response to an RFE or AAO appeal.   Other issues that are introduced at this point are: inapplicability of that decision outside of the Fifth Circuit; Inappropriate and Discriminatory and Excessive Burden of Proof; and the important context that the regulations provide for the Amendment of petitions, a fact that obviates the USCIS argument for adopting that decision.


________________________________________________________________________


 


7. Citation of Defensor v. Meissner is not proper legal grounds for conclusion that petitioner is a "token employer".  The petitioner has met the burden of evidence that it will be the employer, in fact, of the beneficiary.


The decision relies upon the Fifth Circuit case, Defensor v Meissner (2000, CA5 Miss) 201 F3d 384  for sole support of the assertion that "the petitioner is only a 'token employer'", that citation and finding apparently being keyed into the decision without reasoned examination of the representations and evidence offered by the petitioner.   

At issue here is the adoption, misinterpretation and misapplication by USCIS of a circuit court decision, Defensor v Meissner (2000, CA5 Miss) 201 F3d 384  as controlling agency dicta nationwide. Although the Fifth Circuit's decision does not have legal effect outside the geographic boundaries of that court's jurisdiction, it appears to have had the practical effect of large numbers of USCIS and AAO denials issued to petitioner-employers nationwide citing Defensor for certain dicta that the agency has read into the Act.

Petitioner is located in ____________ (# Circuit), and the City, State                    worksite within the #________ Circuit, neither of which is within the jurisdiction of the Fifth Circuit Court of Appeals.  Extension of that particular decision to matters outside the Fifth Circuit is ultra vires.

USCIS has interpreted the Defensor decision as nationwide agency dicta: i.e., in any case where USCIS assumes outplacement of an H-1B beneficiary, the end-user can be assumed to be the employer in fact, and H-1B employment is barred.  In effect, that policy, which constitutes a de facto rule or binding norm, now treats all outplacement consulting companies as agents, requiring production of end-user contracts or detailed itineraries.  Since that de facto rule or binding norm was implemented, Service Centers require detailed itineraries from employer-petitioners which the agency believes may place beneficiary-employees at end-client sites. In many cases, it is impractical to produce detailed itineraries far in advance.  This imposes a burden that cannot reasonably be met, resulting in the denial of petitions, including the one presented for the beneficiary.  

 

B.USCIS Burden of Proof Inconsistent with Regulation 

 

USCIS regulations distinguish between employers and agents, imposing a considerably higher burden of proof on agents as petitioners than it does on employers.  

The regulatory standard that controls documentary evidence that may normally be required of employers is stated at 8 CFR 214.2(h)(2)(I)(B): 

(iv) General documentary requirements for H-1B classification in a specialty occupation. An H-1B petition involving a specialty occupation shall be accompanied by:



(A) Documentation, certifications, affidavits, declarations, degrees, diplomas, writings, reviews, or any other required evidence sufficient to establish that the beneficiary is qualified to perform services in a specialty occupation as described in paragraph (h)(4)(i) of this section and that the services the beneficiary is to perform are in a specialty occupation. The evidence shall conform to the following:



(1) School records, diplomas, degrees, affidavits, declarations, contracts, and similar documentation submitted must reflect periods of attendance, courses of study, and similar pertinent data, be executed by the person in charge of the records of the educational or other institution, firm, or establishment where education or training was acquired.



(2) Affidavits or declarations made under penalty of perjury submitted by present or former employers or recognized authorities certifying as to the recognition and expertise of the beneficiary shall specifically describe the beneficiary's recognition and ability in factual terms and must set forth the expertise of the affiant and the manner in which the affiant acquired such information.



(B) Copies of any written contracts between the petitioner and beneficiary, or a summary of the terms of the oral agreement under which the beneficiary will be employed, if there is no written contract. [emphasis added]




On the other hand, the regulatory requirements at 8 CFR 214.2(h)(2)(i)(F) for documentation to be provided by agents as petitioners (agent/employer) are considerably higher:

(F) Agents as petitioners. An established United States agent may file a petition in cases involving workers who traditionally are self-employed or use agents to arrange short-term employment in their behalf with numerous employers, and in cases where a foreign employer authorizes the agent to act in its behalf. A petition filed by an agent is subject to the following conditions:

(1) A person or company in business as an agent may file the H petition involving multiple employers as the representative of both the employers and the beneficiary(ies) if the supporting documentation includes a complete itinerary of services or engagements. The itinerary shall specify the dates of each service or engagement, the names and addresses of the actual employers, and the names and addresses of the establishments, venues, or locations where the services will be performed. In questionable cases, a contract between the employers and the beneficiary(ies) may be required. The burden is on the agent to explain the terms and conditions of the employment and to provide any required documentation.

(2) An agent performing the function of an employer must guarantee the wage offered and the other terms and condition of employment by contractual agreement with the beneficiary(ies). The agent/employer must also provide an itinerary of definite employment and information on any other services planned for the period of time requested. [emphasis added]


In the event that the conditions of employment materially change, such as transfer of that employee to another location, the regulations provide for amendment of the approved petition.  There is nothing in the record that establishes that the petitioner in the present matter will act as an agent for the petitioner.  There is no reason given, such as a pattern or practice of material violation or recent fraud or misrepresentation related to workplace assignments or failure to file amended petitions for client-site assignments, which might support a conclusion that the petitioner's representations are materially false or misleading.  [NOTE LIMITED APPLICABILITY, MAY NEED OMISSION OR AMENDMENT TO SUIT SPECIFIC CIRCUMSTANCES OF PETITIONER] 


This case may further be distinguished from those cases where the employment offered is inherently, and on its face, under the control of the end-user client of a placement agency, [see, e.g., placement of teachers in public school systems, see, SRC 05 213 51887 (Jan 04 2008), the so-called De Kalb County School System case].  As opposed to placement agencies, the petitioner retains full control over its beneficiary-employee by the fact it has sole and exclusive contractual powers to hire, pay, fire, supervise, reassign and otherwise controls the work of any such employee by force of contract.  In the De Kalb County case, teachers hired in are subject to specific, separate contractual obligations between the H-1B worker and the county school system. [NOTE LIMITED APPLICABILTY, DOUBLE-CHECK THAT PETITIONER'S WORKERS DO NOT SIGN SEPARATE CONTRACTS WITH THIRD PARTY-CLIENTS, AND IF SO, WHETHER THAT LANGUAGE IS LIMITED TO THE USUAL SUBCONTRACTOR LANGUAGE ABOUT OBSERVING COMPANY SAFETY, ETC. RULES WHILE ON THE PREMISES.] 


[IF SUCH AGREEMENT EVIDENCES EXTENSIVE CONTROL BY THE THIRD-PARTY CLIENT OF THE TERMS OF WORK PERFORMED BY SUBCONTRCATORS, MODIFICATION TO THAT CONTRACT MAY BE NECESSARY - THIS IS AN IMPORTANT ISSUE THE ATTORNEY MUST ATTEND TO PRIOR TO INITIAL SUBMISSION OF THE PETITION] 


________________________________________________________________________


 


 


7.  Inapplicability of DEFENSOR Case as USCIS Authority to Define "Control" Over H-1B Workers


The Defensor case dealt with an employment agency that attempted to place H-1B foreign nurses in hospitals within the Fifth Circuit Court of Appeals. Febe Defensor was one of seven Filipino nurses referred to a hospital in Mississippi by a personnel service, Vintage Healthcare, ("Vintage").  The Circuit court ruled, inter alia, that Vintage's stated requirement that its nurses hold a bachelor's degree was just a "subterfuge".  The court stated:


Vintage simply wants to use its token degree requirements to mask the fact that nursing in general is not a specialty occupation.


Essentially, this decision asserts that the end-user client inherently "controls" the work of those assigned there.  It further concludes that employers who place H-1B workers at client sites act as mere placement agents.  Even though the petitioner hires, fires, pays and promotes the beneficiary, it concluded the end-user client is the "true employer" and the agency a "token employer".  That Court of Appeals panel obviously felt that Vintage's representations and equities weren't worth much consideration:


If only Vintage's requirements could be considered, then any alien with a bachelor's degree could be brought into the United States to perform a non-specialty occupation, so long as that person's employment was arranged through an employment agency which required all clients to have bachelor's degrees. Thus, aliens could obtain six year visas for any occupation, no matter how unskilled, through the subterfuge of an employment agency.


The panel did not bother to discuss the impact that contracts, and commercial law concepts and legal definitions have on the employer-employee relationship and between a service firm and its client.  That is a peculiar omission, since contracts are the cornerstone of common law determinations of employment relationships in America.


That is a fatal defect in a decision that purports to guide adjudications in immigrant business and employer-employee law.  The Defensor decision simply is not an appropriate vehicle for establishing a universal nationwide test for all H-1B cases where issues of "specialty-occupation" and "control" over the employment of a worker at a client site may arise


 

8.  Circuit Decision Has Been Misapplied and Is Inappropriate as Agency Precedent 

The Defensor decision simply is not an appropriate vehicle for establishing a universal nationwide test for all H-1B cases where issues of "specialty-occupation" and "control" over the employment of a worker at a client site may arise.  USCIS has apparently recognized some of the shortcomings in Defensor in its issuance of the Neufeld memo and, most recently, the invocation in agency decisions of the Common Law doctrine of "control".  Yet, Defensor is still cited, and its dicta continues to have binding effect on USCIS adjudicators and on petitioners, alike. 

The Defensor decision is inappropriate authority for a number of reasons.  First, it fails to discuss what the factors are that constitute an employer-employee relationship, and neglects to explain what the distinctions are between employment and an independent contractor relationship.  Second, the decision neglects to distinguish the three basic categories of relationships identified in commercial law: employer-employee; employer-independent contractor; employer-agent.  Third, there is no discussion of how the relationship between the petitioner and the beneficiary fits into this legal and regulatory framework, even though the distinction between employer and agent is essential to the determination of the proper evidentiary burden that may be placed on the applicant for an H-1B visa petition.

Fourth, the Defensor decision does not render a reasoned analysis about what the circumstances under which an employee of an independent contractor may enter into co-employee relationship, and which party actually controls the work of a co-employee.  There is no discussion of agency, and whether Vintage was acting as an agent of the nurses or as their employer.  Fifth, the decision does not even touch on the most essential and relevant questions of commercial law which is the effect of the contract between the petitioner and beneficiary.  Without such a reasoned analysis of the realistic range of circumstances that impact the "employer-employee" relationship, and the issues of agency and contract, that decision is not appropriate for continued adoption as agency precedent or citation as authority.


USCIS still must establish a better-reasoned basis for making such determinations, one which, at minimum, does not deviate from published regulation, is rationally related to the letter and intent of Congress in its current H-1B statutory scheme, and which does not have invidiously discriminatory effect.  The most recent invocation of a Common Law basis for the disadvantageous distinctions imposed upon petitioners that outsource H-1B workers also fails rationality, basic fairness, and due process tests.


 


9.  Doctrine of Control Found In Common Law Does Not Support USCIS Position Regarding Requirements for Complete Itineraries and Third-Party Contracts


Recent decisions by the AAO and USCIS Service Center Director have gone on at great length that the common law doctrine of "control" is essential to establishing the requisite "master-servant" relationship in H-1B employment.  Because "employee" is not defined in the Act for H-1B purposes, the Service now cites the Supreme Court's Darden decision[1] for the principle that common law controls where statute leaves the definition of the term undefined.   We agree, but find the specific application of common law principles rendered in recent decisions to be ill-reasoned and fatally inconsistent with judicial and agency norms.  USCIS has again fundamentally misinterpreted and misapplied the common law doctrine of "control" resulting in a fresh batch of recent denials of Form I-129 petitions.   These cases also involve additional questions of legal error that might be reviewed directly by a U.S. Circuit Court of Appeals.


In its invocation of a common law basis for the presumption that H-1B employees outsourced to third-party client sites are not under the "control" of their employers, USCIS stipulates that the measures it takes to insure control are not founded in statute.  The Service may not have fully grasped the consequences of such a stipulation, as this further erodes the degree of deference that Judges will show in review of whether USCIS interpretation is consistent with agency norms.  Agency interpretation of its own enabling statute may be presumed to receive Chevron-style deference, but USCIS has no particular expertise in common law interpretation of employment law, particularly in the area of contracts, and the weakness of the most recent denials shows that the Center Directors have not grasped the fundamentals of regulation of contracts and application of vicarious liability standards of "control" found in torts.  In fact, USCIS has thus far failed to even address the issue of what effect employment contracts have on analysis of employer-employee relationships.  This omission is truly a fatal error in reasoning, as  the courts have traditionally considered most commercial and employment contracts to be facially valid as a fundamental common law principle.


Another fatal USCIS error in these denials, and a pattern of similar H-1B cases going back a number of years, is the fundamental misapplication of regulation.  This occurs in two areas:


First, the applicable regulation [8 CFR 214.2(h)(4)(ii)] states that the H-1B employer must show that it will "supervise, or otherwise control" its workers, but the Service practice is to require documentation amounting to a prospective showing of actual control.  That involves an improperly elevated burden of proof that is inconsistent with applicable regulation.    


Second, in effect, the Service is treating companies that place H-1B workers at client sites as employment agents rather than employers, for which there are two different regulations governing documentation requirements for itineraries.  USCIS improperly imposes the higher burden of evidence for "agents" [8 CFR 214.2(h)(2)(i)(F)] on virtually all companies that outsource - even those that clearly establish they, in fact, supervise the H-1B workers they employ -- disadvantaging them relative to other H-1B employers who keep workers on-site, which can more easily meet the documentation requirements for "employers" under 8 CFR 214.2(h)(2)(I)(B).  In support of this disadvantageous distinction, USCIS now claims it is mandated by common law principles as well as nationwide application of a panel decision of the 5th Circuit, the oft-cited Defensor v Meissner case which has been invoked to deny many hundreds of H-1B (and L-1B) cases in recent years.  


These denials often also allege "discrepancies" in the documentary record submitted by the Respondent that might give rise to doubts about the accuracy of the rest of the record, and cite Matter of Ho 19 I&N Dec. 582 (Comm. 1988), and "cited with approval, Spencer Enterprises v United States of America, 229 F. Supp.2d 1025, 1038 (E.D. Cal. 2008)."  Often, however, these "discrepancies" are easily shown to be trivial and immaterial to such a finding, and cannot in themselves fairly form a basis for denial.  As the 9th Circuit[2] found in review of the District Court Spencer Enterprises decision, "A few errors or minor discrepancies are not reason to question an alien's credibility. See, e.g., Shah v. INS, 220 F.3d 1062, 1068 (9th Cir.2000). Numerous errors and discrepancies, however -- especially where INS is evaluating the credibility of a business plan -- raise serious concerns about the viability of the enterprise."  A close review of the facts in many cases reveals that there are not numerous errors and discrepancies, and these are not comparable cases to Ho.  Furthermore, Ho cites a decision that was itself overturned, so citation by the Service Center Director or AAO of Ho and District Court decision may be inappropriate, casting into further doubt the legal basis of the denial.  


NOTE: Distinguishing the fundamental difference in fact circumstances between cases submitted and those cited by USCIS is an important part of establishing the record, and those distinctions must be made on the record as part of the petitioner's response to an RFE or Notice of Intent to Revoke (NOIR).   Supplementing the record to address faulty agency interpretations of facts is frowned upon by the AAO and often cannot be done at the stage of federal appeals.  While courts may apply the de novo review standard, new evidence may be severely limited to materials that go to questions of law and constitutional issues raised.


 


10. Common Law Does Not Presume Employees Assigned to Third-Party Work Sites Are Not Under the Control of their Employers


Common law doctrine does not support the position taken by USCIS that employees assigned to third-party client sites are presumed not "controlled" by the petitioner. There is simply no basis under common law rules of contracts and torts to blanket classify outsourcing firms as "token employers" or third-party clients as "true employers." The Defensor decision made that finding with regard to the petitioner in that particular case, Vintage Health Resources ("Vintage"), but that does not justify USCIS dicta to broadly classify outsourcing firms as "token employers." 


Furthermore, there is no common law basis to require petitioners to document "actual control" through third-party contracts rather than a "right to supervise" reserved by an employment contract.  Quite the opposite, as will be shown in review of court decisions, below.  The "right to supervise" is the correct standard applied by the courts in drawing the employee-independent contractor distinction relevant to torts liability issues and other controversies arising in common law and employment law cases.  Review of the normal application of the common law principle of "control" by the courts and other regulatory agencies, such as IRS and SSA, reveals that USCIS interpretation of this issue is inconsistent and in conflict with regulatory and judicial norms.  The courts would not be expected to uphold USCIS denials if these issues were squarely presented in litigation.


 


11. Application of Defensor Dicta Contrary to Law and Regulation


USCIS has taken the position that because the petitioner allegedly does not control the work to be performed by the beneficiary at third-party client sites, it thus cannot establish the professional or "specialty" nature of those duties.  For this proposition the Director invokes Defensor v. Meissner, a panel decision of the Fifth Circuit Court of Appeals adopted by USCIS as a nationwide de facto rule and binding norm to support denial of H-1B petitions for companies in outsourcing industries.  In Defensor the panel notably found Vintage to be an employment agency , tagged it a "token" employer, and then found the petitioner's requirement for a bachelor's degree was irrelevant to the determination of whether the position offered was  a "specialty occupation", as required by the regulations. 


While it is a panel decision with limited applicability within one Circuit, USCIS has interpreted Defensor as controlling, nationwide dicta with broad application, and cited that case in thousands of denials in recent years.  Defensor dicta have become de facto policy and a binding agency norm in adjudications at all Service Centers.  


In defiance of existing regulation, USCIS applies Defensor as dicta to require a higher burden of evidence from outsourcing companies than from otherwise similar employers that employ workers on-site. [8 CFR 214.2(h)(2)(I)(B)] In effect, all petitioners that assign H-1B workers to client sites are no longer treated as an "employer" but instead treated for evidentiary purposes as an "agent", to which a substantially stricter regulation applies [8 CFR 214.2(h)(2)(i)(F)].  The regulation that pertains to agents entails a more demanding level of documentary proof requiring production of service contracts and other documents between the petitioner and its third-party clients, something which many companies, wary of regulatory compliance risks, refuse to voluntarily disclose. 


Widespread application of Defensor dicta to deny many hundreds of cases has adversely affected numerous U.S. companies and aggrieved hundreds of individuals.  USCIS has not established a statutory basis or pressing public need for this disparate treatment of H-1B outsourcing, which remains a legal practice consistent with existing statute and regulation.  Congress has on numerous occasions considered and rejected Bills that would restrict H-1B outsourcing[3], thus the agency cannot claim to be furthering Congressional intent through informal rules and adjudications to restrict the practice. A requirement for routine production of third-party contracts is unnecessary to enforcement of LCA requirements, as USCIS has other means to detect violations and enforce compliance.  Unfair and discriminatory application of differential regulatory standards for IT consulting firms is viewed by global consulting firms as a measure to curtail their U.S. consulting operations inside the United States.  Such discriminatory treatment also raises constitutional issues, and presents a protectionist measure violating WTO General Agreement on Trade-in-Services (GATS) agreements.


 


12. CONTRACT LAW DETERMINATIVE:  USCIS Interpretation of Third-Party "Control" of Employment Ignores the Binding Effect of Employment Contract and Privity of Contract


USCIS has left out of its formulation an essential legal element that no reviewing court would fail to consider and would likely find to be determinative in reversing these common law-based decisions.  That missing element in the USCIS analysis is Contract Law.  Common law principles generally govern contract law for services.  In common law, there is the presumption of the validity of commercial contracts and a longstanding admonishment to regulatory agencies that contracts are not to be disturbed except in clear and necessary cases to protect an imperiled  "public interest."[4]  There is an even older doctrine of "privity of contract" that holds the exclusive binding nature on both parties of an employment contract.  The employment contract between the petitioner and beneficiary should be on the record in any H-1B matter, attached as Exhibit 1 in the Employer's response to an RFE, even if previously attached.   The decisions of Center Directors tend to nit-pick alleged "inconsistencies" in the employment agreement, but if the contract is properly drawn these should not raise serious issues.  The absolute paramount issue under the common law is that the record contains a valid contract.


The Director may attempt to attack an employment agreement executed at the time of the beneficiary's initial nonimmigrant employment, perhaps in a different status.  One may see an assertion by USCIS "therefore, at the time of filing, the agreement is not valid for immigration purposes."  However, if it is a valid ongoing contract that has not been shown to have been violated by either party, there is no regulatory authority or reasonable basis that could be provided for such a conclusion.  That is an unsupported finding, given that employment agreements are normally valid indefinitely, unless specified for a fixed period.  The document in question, attached as Exhibit 1 to the Employer's response to an RFE, should ideally contain two parts, the first part of which is an offer letter which may states simply: "Your initial assignment will be for a period of [3 years if an H-1B, or 1 year if an initial L-1B].  However this will be subject to extension or withdrawal as required by the company."  While the first sentence of the initial offer letter appears to make this a fixed contract, the second provides for indefinite extension.  There is no question that in the context of the filing of the subsequent H-1B petition and application for extension of stay, that it is the intention of the company to extend the period of employment.  Furthermore, it is best if the offer is supplemented, extended and updated annually, such as by annual letters which entail a raise in salary offered. 


Nonetheless, the bulk of the specific terms of the employment agreement are not set out in the offer letter and following letters but rather in a detailed employment contract, signed and dated by the company and by the beneficiary as executed prior to the beneficiary's date of initial non-immigrant employment.  That contract, which is controlling, should have a controlling clause that states something similar to the following:


"Term.  The terms and conditions of employment shall commence on the effective date and shall continue thereafter until terminated, as hereinafter provided."  That clause makes this an indefinite employment contract, having not been terminated by either party, still in effect.


The decision of the Director or RFE may also complain, "Further, the employment agreement does not provide a detailed description of the duties to be performed by the beneficiary."  A detailed job description is not a normal part of an employment contract.  Instead, a highly-detailed job description at least adequate for approval of this application should have been provided as part of the petition filed, as further clarified by a response to the RFE.  If there are questions about the specific nature of the job duties, the time and place for USCIS to raise them was with the RFE, not in the denial.  Likely, the denial will not raise any specific issues related to the specialty nature of the job duties stated, other than a blanket statement under the Defensor dicta that the employer's job requirements are not relevant.


Related to this is the second alleged deficiency that is often cited in the denial notice, "In this case, the LCA shows that the beneficiary will work in Los Angeles, VA.  However, the employment letter indicates that the beneficiary will be working at New York, NY - a location that does not appear to be covered by the LCA provided in the record. Discrepancies encountered in the evidence call into question the petitioner's ability to document under the statute and regulations." 


This does not amount to a discrepancy in the record that would cast into doubt the credibility or accuracy of the representations of the petitioner.  In fact, the nature of such a "discrepancy" alleged is misrepresented by the Director in the denial notice.  The employment letter of did not represent that in 2010 the beneficiary "will be working at New York, NY."   Instead, the employment contract might state something altogether different.  The employment letter reflects the fact that at the time the employment contract was executed, "[the beneficiary's] base location will be Los Angeles."  It may go on to state, "However, you may be required to travel globally to perform your responsibilities. . . You acknowledge that this offer of employment is contingent on the stated ability, desire and willingness to accept assignments at company office sites or in specified geographical sales regions, which may be re-defined as the Company's marketing strategies develop."   Read in full in the context of the requirement for the petitioner to change locations of actual work, there is no material discrepancy.  The company will file amended petitions and LCAs in a timely fashion as the place of work changes and the regulations require.  There is no material fact presented on the record that would cause a reasonable and fair reader to conclude that the contract is no longer valid or, as may be alleged,  it "casts doubt on the reliability and sufficiency of the remaining evidence offered in support of the visa petition." 


13. Contracts Presumed to be Valid, Binding, and Exclusive of Control by Third-Party Interests


Neither the lawful nature nor validity of such a contract would be successfully challenged by the Center Director, and the binding power of contract upon the parties as well as exclusion of conflicting third-party interests would be presumed by a court of review.  Furthermore, "[a]bsent serious harm to the public interest," federal agencies should presume the terms of contracts to be "just and reasonable." [MORGAN STANLEY CAPITAL GROUP INC. v. PUBLIC UTIL. DIST. NO. 1., 471 F. 3d 1053 (U.S. Sup. Ct., 2008), Syllabus, Finding 2.]


 


While the U.S. Supreme Court case quoted immediately above deals with public regulation of utility rates, the general common law principle of presumption of validity of contracts and state non-intrusion except to protect the public interest also applies in the context of USCIS consideration of employment contracts between U.S. employers and H-1B non-immigrant workers.  The regulatory agency must have a substantial reason to abrogate a valid contract. The Court instructs in Morgan Stanley Capital, Finding 2, "Under the Mobile-Sierra presumption, setting aside a contract rate requires a finding of 'unequivocal public necessity,' Permian Basin Area Rate Cases, 390 U. S. 747 , or 'extraordinary circumstances,' Arkansas Louisiana Gas Co. v. Hall, 453 U. S. 571 . Pp. 19-23."


Under the rule of privity, a contract protects the interests of both parties to the exclusion of third-parties; outside third-parties therefore cannot "control" the labor of an employee within the meaning of an employment contract.   Otherwise, a contract would be a nullity.  The full scope of the employer-employee relationship is contained within the four corners of the contract, thus the interests and powers of any third parties, even those referenced by that contract, are extraneous and irrelevant to the issue of control.  Third-parties have no legally enforceable rights under contract, and as such cannot sue, thus lack legal standing to claim or protect interests.  Employers may not unilaterally grant control to third-parties over their employees with whom they have an employment agreement.  Third-parties may not enforce workplace rules over employees of contractors, and have no power to hire, fire, or discipline.  Legally, from a torts as well as a contracts standpoint, third-parties lack enforceable power to "control" the work of parties within an employment contract to which they are not party.


USCIS, having stipulated that common law rather than statute is controlling in this issue of control of the employee, is bound to accept the full body of common law doctrine along with the implication for the outcome attendant in this and similar matters where the question of control over employment arises.  The primacy of contract is the central pillar of common and public law[5], and the rule of privity is at the heart of contract law.  The Service cannot cherry-pick which common law doctrines it wishes to apply, and which it wants to ignore, thus USCIS is bound by the logic of the law to concede that the issue of control over the beneficiary boils down to the validity and substance of the employment contract between the petitioner and the beneficiary.  Agency dicta related to the issue of control are defective as they are based on this fundamental doctrinal error along with a host of other reasons, as further detailed below. 


 


14.  Employment Contract Has Non-Compete Clause Which Specifically Forbids Beneficiary to Accept Employment by Third-Party Clients


By the rule of privity, employment contracts exclude the interests of third-parties, in general.  A typical contact in question would have a Non-compete clause:


  Non-competition: During the term of your employment with the Company, you will not, directly or indirectly, (i) engage in any competing business; (2) accept employment with any customer of the Company; or (3) own, be employed by, provide financing to, consult with or otherwise render services to any person or entity who is engaged in any Competing Business.


The Director likely will fail to address the significance of this clause, and likely will not state any reason why the terms of this Clause should not be considered binding on the petitioner and beneficiary, and any third party companies at which the beneficiary would be assigned.   Given that such third-parties are no doubt aware of their own potential liabilities, as well as their due diligence and compliance duties, we have to ask why any rational third-party business entity would employ the beneficiary bound by a defective contract, as this would open them to potential civil liability and commercial litigation.


Clearly, therefore, the USCIS decisions can be shown to be not well-grounded in real world business concerns and compliance rules.   Federal Judges are not inclined to show deference when agency decisions do not reasonable reflect realistic business circumstances.  The dicta in which USCIS bases its decisions are similarly unrealistic and unreasonable in application to commercial law, contracts and common law.    


 


15.  Waiver of Common Law Rights and Duties By Contract 


The terms of a contract are binding on both parties and may by mutual agreement modify common law rights and duties associated with employment, such as "fair notice" and other rights and duties normally associated under common law with employment and separation.  Notably, contracts allow parties to agree to grant or withhold certain rights or duties, such as notice of change of workplace, which might otherwise be governed by common law.  In application, the existence of a valid employment contract trumps the very common law principle of "control" of employment the Service claims governs this issue.  In fact, the common law question of "control" does not always govern the issue of employment.  Rather, the state law of contract and associated rule of "privity", along with the doctrine of "agency", are more often determinative in such cases.  


 


16.  Privity of Contract Is Generally Unaffected by Third-Party Arrangements


What USCIS seems to willfully ignore, or to be unaware of, is the contract law principle of "privity of contact", which has been succinctly defined as follows[6]:  


Privity of contract is a long-established aspect of the law of contract. The essence of the privity rule is that only the people who actually negotiated a contract (who are 'privy' to it) are entitled to enforce its terms. Even if a person is mentioned in the contract - and the contract was intentionally for their benefit - this 'third party' cannot sue.


There is nothing in the Act or any other relevant statute that modifies or overrides the effect of privity of contract.  Inasmuch as the petitioner and beneficiary in this sort of matter have a valid employment contract, the fact of the beneficiary's assignment to a third-party site is irrelevant to their legally-binding employer-employee relationship in which "control" is presumed to vest with the employer.


The exceptions to the rule of privity of contract are limited. Normally only parties to a contract have the right to enforce its terms.  In some limited circumstances third parties who are known beneficiaries to a contract have rights to enforce and sue for breach of a contract. For example:



  1. The law of agency recognized the validity of agreements made by designated agents. An agent must be identified as such in any contract.  A company cannot act as the agent for the labor of an employee unless the contract contains an expressed clause conveying that right and the principal has given prior consent.  The person employing the agent is called the "principal" and the principal could sue or be sued for contracts entered into by his or her agent even though the principal did not sign the contract directly. 

  2. Possession of certain financial instruments conveys enforceable rights to third-parties. Checks, promissory notes, bearer bonds, and negotiable instruments transferred are enforceable by their holder and remain valid after they change hands.

  3. Land covenants are binding on subsequent owners or tenants.  Contracts that restrict or impact upon the use of land or properties such as condominiums may be enforceable upon adjoining landowners, even though they were not privy to the original contract.

  4. The law of trusts creates rights in third parties such as beneficiaries and trustees.


None of the above exceptions to the rule of privity apply in this type of matter. 


Similarly,  the location of work does not impact the privity of an employment contract.  Reassignment of employees to third-party sites does not nullify an employment contract if the terms of the agreement allow for that[7].  In this sort of matter, there is a clause that allows for reassignment to other work sites.  The beneficiary is not bound by any third-party agreement that might affect his rights under his existing employment agreement.  The privity of the original employment contract remains intact, and outplacement does not in itself convey any rights retained by the employer and the employee to any third-party companies.


 


17.  "No-Privity" Rule for Subcontractors


In fact, even if the beneficiary were found by the court to be a subcontractor rather than an employee, subcontractors generally are subject to a "no-privity" rule[8] with third-party clients, which means that they cannot enter into binding agreements with third-party clients without the consent of the prime-contractor.  In federal contracting that is a nearly-absolute rule that also applies more generally in private contracts where no-compete clauses are ubiquitous.  In either case, a contract entered into between a subcontractor and a third-party client would present a breach of contract for which the prime-contractor could sue both parties for damages.  If USCIS claims to be protecting the public from breaches of contract, such a concern is unrealistic as contracts are normally presumed to be self-enforcing, and the realistic consequences of breach of contract suits offer a more than sufficient deterrent.


 


18.    Third-Party Intrusion Upon Contract is a Breach of Contract


On the other side of the equation, prime contractors may not enter into contracts with third parties that bind sub-contractors to the terms outside of an existing employment agreement.  A contract is an enforceable agreement between two or more parties.  Any subsequent change to that agreement by any party that materially changes the terms without agreement by all parties is a breach of contract.  


Any employment agreement that is infringed by a third-party becomes void.   An example of such voidance would be a "merger clause" that automatically voids the employment agreement upon proper notice of the merger or acquisition of the employing company by a new owner.[9]


More generally, an employer may not enter into an agreement with a third-party that materially interferes with the terms of an existing employment contract.  Such a third-party agreement would not be binding on the employee, would present a conflict of interest likely breaching the contract, and, would be grounds for the employee's suit against the other two parties.  One commonly sees such suits for breach of contract when a company's merger or acquisition breach existing contracts for employment and benefits, such as pensions and other residual benefits.


The privity of contract rule voids any employment contract in the event of intrusion of a third-party without the express agreement of both original parties.  The privity rule also limits the power of an employer to act as an employment agent on behalf of an employee.  As it is interpreted by USCIS, IRS decisions, and in the courts, the role of agency is curtailed in employment agreements.  An agent is not considered by these authorities to be an "employer" to any party who contracts for direct services as an agent, and conversely, any party who enters into an agreement to be represented by an agent is not an employee but is instead a "principal" in an agreement with a placement agency.  If a contract contains an agency clause it is not an employment agreement; it is instead a contract for services between an agent and a principal.  


Therefore, unless the USCIS can point to a specific term of the employment contract between the beneficiary and petitioner that allows for mutually binding third-party contracts (in effect, allowing the employer to act as an agent for the petitioner), the rule of privity pertains, and the contract remains valid and the beneficiary's sole agreement for employment.   Any binding agency clause would be in the plain-language of the contact between the two primary parties, and agency would not necessarily be established by production of outside agreements with third-parties.  Any outside employment or agency agreements would be in the contract between the petitioner and the beneficiary, (and, we might add, would necessarily void the non-compete agreement).


Therefore, insofar as privity is maintained, the mere fact of outplacement at a client site is irrelevant to the employee-employer relationship.  Furthermore, because the terms of the employment agreement effectively excludes third-party agreements by the petitioner that might be binding upon the beneficiary, the government has no valid basis upon which it can demand a copy of third-party agreements from the petitioner in order to determine whether it has a valid employer-employee relationship with the beneficiary.  Under the rule of privity, such third-party documents are not relevant to the issue of a valid employer-employee relationship because, unless mutually agreed to, they are null in so far as they may bind the beneficiary. Furthermore, the issue is a nullity because the rule of privity excludes both third-party rights and the right of agency from employment agreements without mutual express agreement.  Finally, the law of contracts subsumes the common law doctrine of control because common law rights and duties may be waived by contract.  The USCIS would lose if this issue were presented to a federal judge.


 


19.  Employee-Independent Contractor Distinction


 


A reviewing court would review this sort of matter to determine that the beneficiary is indeed the employee of the petitioner applying the same approach as in torts liability cases, the area of the law in which issues related to "control" over contractors are most commonly decided.[10] 


 


First, a federal court would review the generally accepted doctrine of agency to determine whether the relationship between the petitioner and beneficiary is indeed that of "master-servant" between an employer and employee or, instead, the petitioner is acting as an agent for an independent contractor.


 


Such an analysis of the distinction between employee and employer versus agent-independent contractor would follow the lines of Conagra Foods v Draper, 92 Ark. App. 220, 212 S.W.3d 61 (2005) in which the Arkansas Supreme Court analyzes the issue of control as follows:


 


We have long held that an independent contractor is one who contracts to do a job


according to his own method and without being subject to the control of the other party,


except as to the result of the work.


 


The governing distinction is that if control of the work reserved by the employer is control not only of the result, but also of the means and manner of the performance, then the relation of master and servant necessarily follows. But if control of the means be lacking, and the employer does not undertake to direct the manner in which the employee shall work in the discharge of his duties, then the relation of independent contractor exists.  [citations omitted]


 


That decision goes on to illustrate how the court draws that distinction, and specifies retention of the right of supervision as the doctrinal basis for deciding the issue of control.  The right of supervision, even if not exercised, is essential to the determination of control, not the other way around:


 


We have addressed the issue of control in several cases. In [citation omitted] we stated that "[i]t is not enough that [the employer] has merely a general right to order the work stopped or resumed, to inspect its progress or to receive reports, to make suggestions or recommendations which need not necessarily be followed, or to prescribe alterations and deviations. Such a general right is usually reserved to employers, but it does not mean that the contractor is controlled as to his methods of work, or as to operative detail. There must be a retention of a right of supervision that the contractor is not entirely free to do the work his own way." Id. (citing Comment c, Restatement Second of Torts 414 (1965)).


 


20.  Right to Supervise not the Actual Exercise of Control Determines a Valid Employer-Employee Relationship Under Regulations


 


USCIS regulation mirrors the following analysis at Comment c, Restatement Second of Torts 414 (1965)  that it is the right of supervision, not the actual exercise of control, that establishes a valid employer-employee relationship.  The regulation at Chapter 8, Section 214.2(h)(4)(ii) of the Code of Federal Regulations (CFR) defines a United States employer for H-1B purposes as follows:


 


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 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. [emphasis added]


 


The recent batch of decisions by Center Directors, as with so many H-1B denials before them, is essentially flawed and contrary to both the bulk of common law jurisprudence on the subject and the actual letter of agency regulation in its exclusive fixation with documentation of the exercise of control to the exclusion of consideration of the right to supervision contained in the employment contract.


To square the circle, an employment contract is presumed by the courts to be valid under the common law, and the work of the employee is presumed to be controlled by the employer.  In any litigation that might result from an agency's finding that disputes the validity of a contract, the burden is on the government to produce evidence that a contract is invalid.  While the burden is on the applicant to establish eligibility in a petition for immigration benefits, the burden shifts in potential litigation before the federal courts.  The burden there would on the government to substantiate any underlying allegation of fraud or wrongdoing that a contract is fraudulent, void, or otherwise invalid.







[1] See, Nationwide Mutual Ins. v. Darden, 503 U.S. 318 (1992).; also, see, related,  CLACKAMAS GASTROENTEROLOGY ASSOCIATES,P. C. V. WELLS . 538 U.S. 440 (2003)


 


 





[3] Among the H-1B restriction bills defeated in the 108th Congress, H.R. 2688, Amendment to Immigration and Nationality Act, a bill introduced on 7/9/03 to repeal H1-B visas and related authorities.  Several 2003-4 bills (S. 2094, H.R. 3820, H.R. 3888, H.R. 3911) would have banned companies that engage in certain off-shoring activities from receiving some federal assistance or federal and state contracts. Yet another bill that year, H.R. 2849, a companion bill to Grassley-Durbin, was intended to impose a labor market test on H-1B and L-1 visas.  A Senate Bill, S. 31, introduced but failed to pass in the 110th Congress, would have, inter alia, banned H-1B outsourcing across state lines and permitted USCIS to initiate and lodge a noncompliance complaint with DOL. 




[4] See, Morgan Stanley Capital Group Inc. v. Public Utility District No. 1, 471 F. 3d 1053, (U.S. Sup. Ct., 2008); upholds the fifty-year old Mobile-Sierra doctrine discussed therein.


 




[5]  For a leading view of contract as public law, see Morris R. Cohen, The Basis of Contract, 46 HARV. L. REV. 553 (1933).  For a recent analysis, see Roy Kreitner, 107 Mich. L. Rev. 1533 (June, 2009),  FAULT AT THE CONTRACT-TORT INTERFACE .





[7] This is not changed by the fact that in some "employment at-will" states, the place and nature of the work may be modified without prior notice when there is no relevant clause on the employment contract.




[8] See, Interstate Contracting Co. v City of Dallas, No. 02-10038, USDC No. Dist. TX, (Feb. 4, 2003), ftn. 6, http://caselaw.lp.findlaw.com/data2/circs/5th/0210138p.pdf,  op cit.,  Henry R. Kates, Facilitating Subcontractors' Claims Against the Government Through the Prime Contractor as the Real Party in Interest, 52 GEO. WASH. L REV. 146, 150 (1983); see also Severin v. United States, 99 Ct. Cl. 435 (1943), cert. denied, 322 U.S. 733 (1944) (in a breach of contract claim against the federal government, a prime contractor may recover damages on behalf of its subcontractor only if the prime contractor suffered actual damages); J.L. Simmons Co. v. United States, 304 F.2d 886, 888 (Ct. Cl. 1962) (a prime contractor suffers actual damages if the prime contractor (1) has reimbursed its subcontractor for the subcontractor's damages; or (2) if the prime contractor remains liable for the such reimbursement in the future); Folk Constr. Co. v. United States, 2 Cl. Ct. 681, 685 (1983) (limiting the application of the Severin doctrine and holding that "a prime contractor is precluded from maintaining a suit on behalf of its subcontractor only when a contract clause or release completely exonerates the prime contractor from liability to its subcontractor"); also, see, related, No Privity With Subcontractors - Not An Absolute Rule, (June 2004),  http://www.blankrome.com/index.cfm?contentID=37&itemID=462




[9] See, e.g., Armstrong v American Home Shield Corporation, 333 F.3d 566, (5th. Cir., 2003)


 




[10] The majority of contracts (i.e. employment agreements, leases, general business agreements) are controlled by the state's common law rather than federal statute.  Most case law involving control over employment therefore cites state court decisions.  Under the Federal Torts Claims Act (FTCA), the applicable state law in which a tort occurred is controlling.  The common law principle of master-servant "control" has no distinct federal source.



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