Labor Immigration Law

We have previously written extensively about the January 2010 Neufeld Memorandum and the recent lawsuit challenging its validity.   We wanted to provide some recent updates on the case as it is of great interest to many of our clients and readers.

On June 25, 2010, the government filed a Memorandum in Opposition to the complaint.    The opposition is mainly based on technical arguments.  However, the government makes also the arguments that its policy-making ability pursuant to memoranda is exempt from the Notice and Comment requirements for rulemaking and that the plaintiffs have failed to show irreparable harm if the preliminary injunction were to be granted and, most interestingly perhaps, that agency memoranda are do not have the force of regulations and are just a suggestion to adjudicators on review criteria.

Subsequently, on July 9, 2010, the plaintiffs filed a reply to the government’s Memorandum of Opposition.  In it, the plaintiffs directly address the government’s arguments, including the argument that the policy memoranda does not constitute a regulation.   Plaintiffs argue that the policy guidance may not explicitly state that it is binding; however, in spirit and practice, it actually is.

We will continue to monitor the developments in this case as it affects a large number of our readers and clients.  Furthermore, the impact of this lawsuit may be broader than just the Neufeld Memorandum as the scope of the case may expand to cover other USCIS memoranda.   If you haven’t already, please subscribe to our free weekly newsletter to receive news and updates on this and related topics.

We have written extensively in the past regarding the January 8, 2010 Neufeld Memo which introduced guidance requiring H-1B applications to show proof of employer-employee relationship between the H-1B petitioner and beneficiary.  The Neufeld Memo has affected mostly staffing and consulting companies where the H-1B beneficiaries are employed at third-party worksites.

USCIS Sued to Prevent Enforcement of the Neufeld Memo Guidelines

In a five-count complaint filed by a coalition of staffing companies and representative trade associations, the USCIS is asked to stop temporarily and permanently from applying the Neufeld Memo in H-1B adjudications.  The case is Broadgate v. USCIS and is assigned to Judge Kessler at the U.S. District Court for the District of Columbia.

The complaint alleges that the Neufeld Memo abruptly altered long-standing agency policy which has permitted companies from placing H-1B workers at third-party job sites.  The complaint further alleges that existing USCIS guidelines specify that an employer-employee relationship does exists when the petitioner company may “hire, pay, fire, supervise, or otherwise control the work of any such employee.”  The plaintiffs in this case claim that the Neufeld Memo constitutes a legislative regulation because it sets forth new binding standards that prevent employers that place employees at third-party worksites, but which otherwise meet the regulatory definition, from sponsoring H-1B nonimmigrants.

The complaint alleges that the new policy (i) is contrary to existing law and regulations, (ii) is arbitrary and capricious because the government failed to articulate a policy justification, (iii) violates the Administrative Procedure Act notice-and-comment requirements, and (iv) should have been issued following a certification under the Regulatory Flexibility Act (which requires regulators to consider the potential impact of regulations on small business).

Conclusion: More to Follow

Our office has been very involved in this issue from the publication of the Neufeld Memo and we have seen the impact of the memo on H-1B adjudications and RFEs.   USCIS has been under some pressure to amend the Neufeld Memo, at least in some respects, and this lawsuit is certain to put more pressure on resolving this controversy.  We will continue monitoring this case and the Neufeld Memo developments coming out of USCIS and will provide updates.  In the meantime, please do not hesitate to contact us or subscribe to our free weekly newsletter.

We have written extensively over the past two months on the January 8, 2010 Neufeld Memorandum (the “Neufeld Memo”) changing the H-1B adjudication standards for H-1B employers engaged in 3rd party placement or employee-owners.  We have also written about AILA’s efforts to rescind the Neufeld Memo.

In a letter dated March 19, 2010 addressed to the USCIS Director, AILA puts forward a renewed call for rescission of the Neufeld Memorandum by explaining the unintended and burdensome consequences of the Neufeld Memo.  The AILA letter discusses the economic impact of the Neufeld Memo on a number of H-1B petitioners.  Also, the letter discusses the undesired and unintended (according to AILA) impact of the Neufeld Memo on a number of industries:

• physicians – since many states prohibit the physician to work directly for a hospital, many physicians are unable to obtain H-1B under the Neufeld Memo employer-employee relationship standard because they cannot, by law, be sponsored by the employer where they will actually work.
• government contractors – many government contractors operate on a purely third-party worksite placement system, and for many of these contractors, the Neufeld Memo precludes hiring H-1B workers.
• H-1B entrepreneurs/job creators – the Neufeld Memo would also prevent H-1B visas to be issued to foreign entrepreneurs (and job creators) who have some ownership interest in their U.S. company.
• IT consulting companies – meeting the Neufeld Memo obligations also impacts IT consulting companies, which have very useful in helping larger companies set-up projects quickly and with the right staffing.

The AILA letter concludes that the Neufeld Memo should be rescinded because of its negative impact on a number of industries and the fact that the de facto rulemaking is done in violation of the Administrative Procedures Act.

Earlier today USCIS held a collaboration session on “Determining Employer-Employee Relationships for Adjudication of H-1B Petitions.“  We had the opportunity to attend the session, to listen and to engage in a discussion regarding the January 8, 2010, USCIS Memorandum by Donald Neufeld on the Employer-Employee Relationship.

The Session Generated Great Interest

The session proved to be very popular.  There were about 50 in-person attendees and over 600 phone conference dial-ins.   Obviously, this Memorandum has stirred many interests and has caused a tremendous amount of emotions, both negative and positive.

Although the session was expected to be a question-and-answer format, it turned out that both the questions were posed mainly as comments and reactions to the Memo.  In addition, when questions were posed, USCIS representatives, which included Donald Neufeld, did not provide much information or guidance.  As a result, we can report on what we heard and felt are concerns associated with the January 8, 2010 Memo.  Hopefully, USCIS will provide some sort of a response to the multitude of comments and reactions.

There were comments from immigration attorneys and practitioners, business owners, employees, representatives of trade organizations, and former congressmen, among others.  USCIS started first, by setting out their goals in drafting the Memorandum – to provide clearer standards for adjudication and to provide more clarify and transparency in the H-1B adjudication process for all parties involved.

Comments Were Mostly Critical

Then, the floor was open for questions and comments.  Overall, the comments were critical of the Neufeld Memorandum.   Many comments confirmed what we have realized from recent conversations with some of our consulting or staffing company clients – that the new Memorandum is likely to hurt their business due to the unpredictability of the current adjudication standards.  Several owners of IT consulting companies cited downsizing (and potentially closing) their companies due to the new standards and having to cut not only H-1B employees but also U.S. workers who work at the company.  A number of comments referred to the unintended (negative) consequences of the Neufeld Memorandum – for example, some physicians work at hospitals, but hospitals are prohibited by state law to employ them directly, thereby resulting in a situation where H-1B for a physician employed at a hospital is not possible under the Memorandum.

A caller expressed a concern that the Memorandum creates even more ambiguity in cases where an employer has in-house and client-placements of H-1Bs and with respect to a real situation where USCIS rejected H-1Bs for both in-house and client-placed employees due to the fact that USCIS could not have guarantee that in-house employees would not be placed at a client site at a later time.

We have seen RFEs which are drafted as a result of the January 8, 2010 Memorandum and a caller expressed dissatisfaction with (1) the length of the standard RFE seeking explanation of the employer-employee relationship but also with (2) the legally incorrect requirements for establishing such employer-employee relationship.

Some Callers Praised the Memorandum

There were also comments which praised the Memorandum.  A caller from a professional association was outraged that in this economic climate the H-1B program exists at all; citing high unemployment, the caller seemed to call for abandonment of the H-1B program altogether.   The Memorandum was similarly praised from callers representing organizations calling for limited number of work visas and also calling for a more restrictive set of rules on current staffing companies.

USCIS Listened, Mostly

USCIS representatives mostly listened.  What USCIS could acknowledge was that the January 8, 2010 Memorandum is not related to the Customs and Border Protection (CBP) issues some H-1B holders faced since the holidays at Newark, New Jersey, airport.   However, it was noted that CBP has coordinated its Newark actions with the FDNS investigations on employers who potentially have violated the H-1B program rules.

Conclusion

While we applaud USCIS’ desire to open a dialogue with its stakeholders regarding the implementation and the impact of the Memorandum, given the number of negative comments and the unintended consequences of the Memorandum, it may seem that such dialogue should have been done before the publication of the Memorandum.  USCIS stated as one of its goals a transparent process; yet, it appears that the Memorandum was drafted in the shadows.

We are hoping that, in response to this meeting, USCIS will engage in a more robust review process and will provide some amendments to the Memorandum or, at the very least, some clarifications and explanations.

The Neufeld Memorandum of January 8, 2010, has generated a substantial amount of discussion with its newly-proposed standard for “employer-employee” relationship applied to third-party H-1B employee placements, which are very common for consulting companies.  Our office has handled many consultations and inquiries relating to the Neufeld Memorandum and what it means for the thousands of H-1B employees currently on H-1B visa and for their employers.

AILA Seeks Rescission of the Neufeld Memorandum

Our office has revised its standard H-1B preparation guidelines for third-party worksite H-1B petitions to comply, to the extent possible, with the new requirements imposed by the Neufeld Memorandum.  In the meantime, the American Immigration Lawyers Association (AILA), in a January 26, 2010, Memorandum addressed to the Chief Counsel of USCIS, calls for the rescission of the Neufeld Memorandum effective immediately and for the issuance of a new memorandum to redefine the employer-employee relationship differently, considering legal precedent.

The AILA Memo is quite lengthy (24 pages) and goes into a great detail to substantiate its main claims that (1) the Neufeld Memorandum improperly creates substantive new rule outside the proper channel for making such rules and (2) that the employer-employee relationship definition in the Neufeld Memorandum is improper and is against congressional intent.

The Neufeld Memorandum is Improper Rulemaking

As an initial matter, AILA argues that the Neufeld Memorandum is issued improperly  because it seeks to change substantive rules without the necessary process.  Change in substantive rules must be done by following the required notice and comment procedures.  AILA argues that the “guidance” in the Neufeld Memorandum is a substantive rule change which cannot be imposed by a memorandum;  instead it should follow the normal rulemaking process.  As a result, AILA argues that the Neufeld Memorandum should be set aside as a violation of the Administrative Procedures Act (APA).

The Neufeld Memorandum Definition of Employer-Employee Relationship is Incorrect

As its main argument for seeking the rescission of the Neufeld Memorandum, AILA argues that the sweeping definition of “employer” is inconsistent with the law, impedes its intent and purpose and is inconsistent with decades of precedent.  The AILA Memo then goes into great detail and legal analysis of its claim to conclude that the Neufeld Memorandum, in addition to certain recent AAO’s non-precedent decisions and the accompanying adjudications at the Service Centers that are applying these decisions to current filings seek to overturn over fifty years of consistent precedent and regulatory interpretation to categorically deny eligibility for benefits to an entire class.

Conclusion

The AILA Memorandum is a well researched and substantiated request for the rescission of the Neufeld Memorandum.  However, we do not know yet what USCIS’ position would be in response and whether USCIS will take any steps in response to this memorandum.  We will continue to provide updates on this topic as it is of great interest of our clients, readers and a large portion of the employment-based immigration community.

In a January 8, 2010, Memorandum, Donald Neufeld, the Associate Director for Service Center Operations, provides some guidance on the standards for H-1B petitions filed by independent contractors, self-employed beneficiaries, and beneficiaries working at third-party worksites.

Focus on Employer-Employee Relationship

The guidance is primarily concerned with the employer-employee relationship.  Pursuant to the H-1B regulations, an employer who seeks to sponsor a temporary worker in an H-1B specialty occupation is required to establish such employer-employee relationship.  USCIS deems that such relationship is established when the employer has the right to control the means and manner in which the work is performed.

Some of the factors which are helpful in determining whether such employer-employee relationship exists are the employer’s ability to pay, hire, fire, supervise or otherwise control the work of the employee.

Who Is Most Affected by the New Guidance?

While the employer-employee relationship must be established in all H-1B cases, in practice, the right to control and the employee-employer relationship issues arise in self-employment, contractor (or consultant) companies or with beneficiaries placed at third-party worksites.  The right to control issue should be addressed also with in-house H-1B petitions, although in many cases it would be easy to establish such right to control when the employee is working on the employer’s premises.

Establish the Employer’s Right to Control

Under the Neufeld Memorandum guidance, with each H-1B petition, USCIS must determine if the employer  has a sufficient level of control over the employee.

The right to control can be established when considering the following factors:

1. Does the petitioner supervise the beneficiary and is such supervision off-site or on-site?
2. If the supervision is off-site, how does the petitioner maintain such supervision (weekly calls, progress reports, site visits, etc.)?
3. Does the petitioner have the right to control the work of the beneficiary on a day-to-day basis if such control is required?
4. Does the petitioner provide tools or instrumentalities needed by the beneficiary?
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?
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?
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 the means in which the work product of the beneficiary is accomplished?

The Neufeld Memorandum provides that these factors should be weighed in the “totality of the circumstances” which allows some flexibility to focus on some, but not all, factors.

Additional Evidence Required in H-1B Filings by Consulting Companies and Third-party Worksite Employers

As a result of the Neufeld Memorandum, USCIS establishes a new level of evidence to be submitted as part of all new, transfer and even extension H-1B petitions filed by employers which intend to place the beneficiary at a third-party worksite.

Currently, such third-party worksite H-1B applications require evidence to establish the exact position and duties in which the beneficiary will be engaged at the third-party worksite.  In addition, as a result of the new guidance, H-1B petitioners will have to now include information to satisfy all or many of the right to control factors described above.

Pursuant to the field guidance, such right of control test is applied to all new, transfer and even H-1B extensions with the same employer.

Conclusion

The Neufeld Memorandum creates another set of information and documents which will have to be prepared and provided as part of each H-1B filing by a consulting, self-employment and third-party worksite petitioner.

While the guidance is intended to apply for all H-1B beneficiaries, regardless of where they are employed, the guidance is most likely to be more rigorously enforced against employers who file H-1B petitions on behalf of employees placed at a third-party site or off-site.

Petitioners who regularly place employees off-site should become familiar with the 11 factors described above  and be prepared to answer and document the petitioner’s right to control the intended H-1B beneficiary.

In a Memorandum, dated September 14, 2009, Donald Neufeld, the Acting Associate Director for Domestic Operations as USCIS, provides some clarifications and amendments to the Adjudicator’s Field Manual relating to Form I-140, Immigrant Petition for Alien Worker.

1.  Definition of Employer for Outstanding Researchers or Professors under Section 203(b)(1)(B).

Each EB-1B petition  for outstanding researcher or professor must include, as part of the initial evidence, an offer of employment by a prospective U.S. employer which offers the candidate a tenure or tenure-track teaching position or a permanent research position.    The employer must be a university, institution of higher education or a department, division or institute of a private employer if such department, division or institute employs at least 3 persons full-time in research activities.  8 C.F.R.  204.5(i)(3).

The Neufeld Memorandum clarifies that government agencies do not fit into this definition of employer for EB-1B petitions unless the government agency is actually a U.S. university or an institution of higher learning.   Accordingly, government agencies which do not fit into this definition of employer may not pursue EB-1B petitions.  However, they may be able to apply under a different section assuming the beneficiary qualifies, for example Section 203(b)(1)(A).

2.  Approved Labor Certifications’ 180-day Validity Period

The Department of Labor (“DOL”) has established a validity period of 180 days for approved labor certifications.  As a result, an approved labor certification must be filed in support of a Form I-140 petition during the labor certification’s validity period.    DOL has not, however, established any rule regarding the approved labor certification’s validity when its expiration falls on a Saturday, Sunday or a federal holiday.

In the Neufeld  Memorandum, USCIS takes the position that it would accept I-140 filings where the supporting labor certification validity period ends on a Saturday, Sunday or a federal holiday on the next business day.    This is consistent with other USCIS policies which allow for the filing of petitions and applications that fall on a Saturday, Sunday or a federal holiday to be extended until the next business day.

In a memorandum dated August 6, 2009, Donald Neufeld, the Acting Associate Director for USCIS Domestic Operations Unit provides new guidance and amends USCIS policy with respect to review of Form I-140 successor-in-interest (“SI”) amendments.  The goal of the new guidance is to update (the dated) USCIS policy in light of changing business realities with respect to corporate mergers and acquisitions.

Prior I-140 SI Standard

The prior standard by which I-140 SI filings were reviewed was that the I-140’s validity will be reaffirmed only if the successor company had assumed all of the rights, duties, obligations and assets of the original employer and continue to operate the same type of business as the original employer.  Additionally, the new employer had to establish its ability to pay the profferred wage specified on the labor certification.

The old standard, initially set forth in a 1993 Paleo memorandum, is quite old and does not reflect the realities of the corporate M&A and business practices where it is now rare that a successor company would assume all of the predecessor company’s rights and obligations.

New Standard for I-140 SI Review

According to the Neufeld Memo, for all SI I-140 petitions filed after August 6, 2009, the adjudication officers should focus  on the following factors:

1.  The Job Opportunity Offered By The Successor Must Be The Same As The Job Opportunity In The Original Labor Certification.

The job offered by the successor must remain unchanged with respect to rate-of-pay (upward adjustments due to passage of time are acceptable), job description and job requirements specified on the labor certification.   There cannot be any changes to the job which would affect the labor market test conducted initially by the predecessor company.  The job opportunity must continue to exist at all time and there must not be a substantial lapse of operations with respect to the successor company after the business transfer.

2. The Successor Company Bears Burden To Establish Continuing Eligibility In All Respects, Including Ability-to-Pay.

The successor company must demonstrate that all of the criteria for the visa classification initially proposed have been met.  This includes, but is not limited to, the predecessor’s ability to pay the profferred wage from the date of the filing of the labor certification (the “priority date”) until the date of the business transfer. Similarly, the successor must demonstrate that it is a valid “employer” under the USCIS regulations and that it has ability to pay the profferred wage.   The I-140 SI petition must also include evidence to establish that the sponsored employee possesses the minimum education/experience specified on the labor certification.

3. The Successor Must Fully Document The Transfer And Assumption Of Ownership.

The Neufeld Memo specifically addresses that the transfer of ownership must occur after the approval of the underlying labor certification.  Additionally, the successor must present evidence to document the business transaction such as:

• contract of sale or similar document of the acquisition;
• mortgage closing statements;
• SEC Form 10-K;
• audited financial statements;
• documentation of the transfer of real property and business licenses;
• copies of financial instruments used to executed the transfer; and
• media or other reports of the business transfer.

When a specific unit of the predecessor unit is being transferred, the transferred unit must be clearly defined unit within the predecessor organization and that unit must be transferred in its entirety to the successor except certain unrelated liabilities.  As discussed above, the job offered to the alien beneficiary must continue to be in the transferred unit.

AC21 and Successor-in Interest

The Neufeld Memo specifically addresses the situations in which the alien beneficiary is entitled to port his or her process to a new employer under Section 106(c) of AC21.  In such cases, a SI entity need not file a new petition on alien’s behalf assuming AC21 conditions have been met (such as “same or similar job”).

SI Amendments Not Needed For Self-Sponsored I-140 Petitions

I-140 petitions filed in connection with visa categories which do not require labor certifications (EB-1 EA, EB-2 NIW) remain valid even if a business transfer has occurred.  There is no need of I-140 SI amendments in such cases.

New Labor Certification May Be Required In Certain Cases

If the successor entity cannot support the requirements outlined above a new labor certification setting forth the changed job conditions must be filed.   Specifically, USCIS required a new labor certification be filed when (1) the successor entity has not met the three factors outlined in the Neufeld Memo, (2) the labor certification is not valid for the new geographic area of the alien beneficiary’s proposed employment, or (3) there has been another material change in the job opportunity offered.

Donald Neufeld, in a Memorandum dated June 17, 2009 provides some guidance on the equivalency of foreign medical degrees for the purpose of qualifying for the EB-2 category.

A U.S. medical degree is obtained after completing a bachelor’s degree and as a result, a U.S. medical doctor degree is considered to be an advanced degree. In many other countries a person may be admitted to medical school directly out of high school. In these instances the program of study for the foreign medical degree is longer in length (generally 5-7 years in duration) than is required for a less specialized foreign bachelor’s degree (generally 3-4 years in duration.) In some countries the name of the degree is “Bachelor of Medicine, Bachelor of Surgery”, and the program of study may involve ONLY medicine, to include some limited basic sciences. A foreign medical degree may qualify as the equivalent of a U.S. MD degree and thus an advanced degree for EB2 purposes if, at the time of the filing of the labor certification application, the following two conditions are met:

1.  The alien beneficiary:

A. Has been awarded a foreign medical degree from a medical school that requires applicants to obtain a bachelor’s degree equivalent to a U.S. bachelor’s degree as a requirement for admission, or;

B. Has been awarded a foreign medical degree and a foreign education credential evaluation is provided that credibly describes how the foreign medical degree is equivalent to a medical degree obtained from an accredited medical school in the United States, or;

C. Has been awarded a foreign medical degree and has passed the National Board of Medical Examiners Examination (NBMEE) examination or an equivalent examination, such as the U.S. Medical Licensing Examination (USMLE), Steps 1, 2 & 3,

2.  The alien beneficiary was fully eligible for the position described on the labor certification application, on the date that it was filed, by establishing that:

A. He or she had a full and unrestricted license to practice medicine in the state of intended employment and continues to hold such an unrestricted license, or;

B. His or her foreign medical degree is shown to meet the medical degree requirements to be eligible for full and unrestricted licensure specified by the medical board governing the place of intended employment.

The Neufeld memorandum further describes requirements for filing a petition for a foreign national holding a medical doctor degree.

In a Memorandum dated June 17, 2009, Donald Neufeld, the Acting Associate Director for Domestic Operations, has provided some guidance on the employment-based fifth preference (EB-5) green card category reserved for entrepreneurs willing to invest a substantial capital into the U.S. and create at least 10 full-time jobs.

About EB-5

Section 203(b)(5) of the Immigration and Nationality Act creates a class of immigrant visas, EB-5, for individuals who invest a specified amount of capital in the U.S. economy and who will “create full-time employment for not fewer than 10″ qualified employees.   Initial EB-5 status has conditions which condition must be removed at the end of a two-year period by filing an application to remove conditional residency and by showing that the applicant has continued to meet section 203(b)(5) requirements.

The Neufeld Memorandum and Job Creation

The Neufeld Memorandum directs the adjudicators that a specific business plan be required as part of each EB-5 application which business plan must provide accounting of the required number of jobs created within the two-year period of conditional residency.  However, the adjudicators are given some flexibility as to  the timing of job creation.

For purposes of determining the period in which job creation is counted, USCIS has indicated that such period begins six (6) months after the adjudication of Form I-526 and the business plan filed in support of Form I-526 must make sure that job creation covers this 2-year period commencing 6 months following adjudication.

The Neufeld Memorandum specifically indicates that certain construction jobs can be included in the count of 10 full-time jobs required by EB-5.  Section 203(b)(5) requires that 10 full-time jobs be created by the proposed venture.  Full-time employment is defined as “employment in a position that requires at least 35 hours of service per week at any time, regardless of who fills the position” (emphasis added).  USCIS has advised previously that intermittent, temporary or seasonal jobs do not qualify for “full-time jobs.” However, the Neufeld Memorandum specifically indicates that some construction-related jobs should qualify to be considered full-time jobs and should therefore be counted.  The focus on the inquiry, according to the Neufeld Memorandum, should be whether the position created is continuous full-time employment rather than intermittend, seasonal job.  This shift in focus allows some full-time construction jobs, generated from the foreign entrepreneur’s investment, to be counted towards the 10 jobs requirement.

An additional clarification by the Neufeld Memorandum — independent contractors and multiple part-time jobs cannot be used and be counted towards the jobs requirement.