Labor Immigration Law

Under a new directive marked as “Tier 1″ (high strategic importance and significant impact on one or more industries), the Internal Revenue Service (“IRS”) has indicated that it will be focusing increased resources on H-1B sponsor companies’ tax withholding and reporting.

As our clients and readers know, the H-1B nonimmmigrant work visa is one of the most commonly used work visas for sponsoring foreign workers.   The H-1B visa requires that the H-1B beneficiary be employed as an “employee” (as opposed to a “consultant”) with all the benefits and rights afforded to the company’s other employees.   All wages earned by H-1B employees must be reported on Form W-2 and subject to withholding of income tax (and often employment tax) in the same way as U.S. citizens and residents.  Additionally, the IRS can examine expenses paid for or reimbursed to the employee which payments could represent compensation or a taxable employee benefit. 

Our firm often receives inquiries from corporate and individual clients as to whether there is a specific requirement that the H-1B employee be considered a “W-2 employee” versus a “1099 contractor.”  The IRS statement and the upcoming audits of H-1B employers make it very important that any H-1B employee be considered as an “empoyee” and a Form W-2 prepared along with the proper withholdings.

There has been quite a bit of legal activity in connection with the Bush administration executive order requiring federal contractors to use E-Verify to check the employment eligibility of all  newly hired employees as well as current employees directly working on a contract.

Rule Goes Into Effect on September 8, 2009

On August 26, 2009, a U.S. District Court struck down the challenges to the E-Verify rule.  As a result, the new rule goes into effect on September 8, 2009.

This means that most federal contracts awarded, as well as solicitations issued after September 8, 2009, must include a clause mandating use of E-Verify for all employees hired during the contract period and all existing employees assigned to perform work under the contract.  The United States Citizenship and Immigration Services (USCIS) has published information and frequently asked questions on its website regarding application of the rule.

E-Verify Compliance

The Capitol Immigration Law Group is an E-Verify designated agent which allows us to handle E-Verify compliance on behalf of our clients.  If you or your company are interested in E-Verify compliance assistance please feel free to contact us.

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.

The H-2B filing period for fiscal year 2009 (FY2009) has been reopened by USCIS due to insufficient applications filed under the cap.  Accordingly, USCIS accepts immediately new H-2B petitions under the FY2009 cap for starting work date before October 1, 2009.

FY2009 H-2B Numbers Are Under the Quota

On January 7, 2009,  USCIS announced that it has accepted a sufficient number of H-2B petitions to meet the annual cap of 66,000 H-2B visas.  However, the Department of State has received far fewer than expected requests for H-2B visas and as a result, has issued only 40,640 H-2B visas for fiscal year 2009 to date. This means that there are approximately 25,000 visas that may go unused, as they have not been granted. Because of the low visa issuance rate, USCIS is reopening the filing period to allow employers to file additional petitions for qualified H-2B temporary foreign nonagricultural workers.

FY2009 Filing Deadline Is Imminent

The normal (non-premium processing) adjudication time frame for H-2B petitions is 60 days. USCIS will make visa numbers available to petitions in the order in which the petitions are filed. However, because H-2B petitions (Form I-129) for fiscal year 2009 visas must be received, evaluated, and adjudicated on or before the fiscal year 2009 deadline of Sept. 30, 2009, USCIS cannot guarantee approval of any H-2B petition on or before the Sept. 30, 2009 deadline. Employers therefore are encouraged to file as soon as possible and to request premium processing by filing a Form I-907 and
submitting the $1000 premium processing fee, which will allow for expedited adjudication before October 1.

Petitions received on or after Oct. 1, 2009, and/or requesting a starting date on or after Oct. 1, 2009, will be considered towards the fiscal year 2010 H-2B cap and are subject to all eligibility requirements for fiscal year 2010 H-2B filings, including 8 CFR 214.2(h)(6)(iv)(D), which requires that the start date listed on the petition be the same as the starting date authorized on the temporary labor certification.

Please see a USCIS FAQ regarding this H-2B filing window reopening.

The U.S. Customs and Immigration Enforcement (“ICE”) has released a supplemental guidance sheet with respect to gap-cap extensions available to holders of F-1 status who work pursuant to their optional practical training and who are beneficiaries of a cap-subject H-1B work visa petition.

The guidance sheet is helpful in not only describing in more detail what happens when an OPT F-1 holder is a beneficiary of an H-1B petition.  Normally, when USCIS receives an H-1B petition it enters the information into its mainframe called CLAIMS.  This update automatically updates the SEVIS system and which automatically should reflect the cap-gap extension for the F-1 holder.    If this process does not work (due to time constraints, mainly), SEVIS allows the Designated School Official (“DSO”) to enter manually that the student is in valid status pursuant to cap-gap into SEVIS.

This functionality also allows DSOs to enter gap-cap information in cases where the H-1B application has been filed but it has not yet been processed by USCIS.  The guidance notes, however, that the “manual” update of cap-gap status by the DSO should not be done unless in cases where the student’s OPT may expire before USCIS can receipt the H-1B petition (and therefore enter the H-1B petition in CLAIMS).

As an E-Verify designated agent, we provide E-Verify verification services to many small and mid-size businesses and allow them to assure E-Verify participation without the hassle of running E-Verify inside their operations.

An E-Verify designated agent, we work with our E-Verify company clients to ensure that they follow the rules and procesures required by E-Verify.  This is a helpful chart showing some of the major DOs and DON’Ts when it comes to E-Verify.

DOs:

• Use program to verify employment eligibility of new hires;
• Use program for all new employees regardless of national origin or citizenship status;
• Use program for new employees after they have completed the I-9 Form;
• Promptly provide and review with the employee the notice of tentative nonconfirmation (of one is issued);
• Promptly provide the referral notice from the Social Security Administration (SSA) or Department of Homeland Security (DHS) to the employee who chooses to contest a tentative nonconfirmation;
• Allow an employee who is contesting a tentative nonconfirmation to continue to work during that period;
• Contact E-Verify if you believe an employee has received a final nonconfirmation in error;
• Post required notices of the employer’s participation in E-Verify and the antidiscrimination notice issued by the Office of Special Counsel for Immigration-Related Unfair Employment Practices (OSC);
• Accept any Form I-9 List B document with a photo from an employee who chooses to provide a List B document;
• Secure the privacy of employees’ personal information and the password used for access to the program;
• Delay running an E-Verify query for an employee who has not yet been issued a Social Security number until the Social Security number is issued;
• Allow an employee who has not been issued a Social Security number to work throughout the period that the employee is waiting for his or her Social Security number to be issued.

DON’Ts

• Use program to verify current employees;
• Use program selectively based on a “suspicion” that a new employee or current employee may not be authorized to work in the U.S. or based on national origin;
• Use program to pre-screen employment (applicants unless you are a State Workforce Agency);
• Influence or coerce an employee’s decision whether to contest a tentative nonconfirmation
• Terminate or take adverse action against an employee who is contesting a tentative nonconfirmation, including denying or reducing scheduled hours, delaying or preventing training, mistreating the employee, requiring the employee to work longer hours, requiring the employee to work in poorer conditions, or subjecting the employee to any assumption that s/he is unauthorized to work during this period, unless and until receiving a final nonconfirmation or no show response;
• Ask an employee to obtain a printout or other written verification from SSA or DHS when referring that employee to either agency;
• Ask an employee to provide additional documentation of his or her employment eligibility after obtaining a tentative nonconfirmation for that employee;
• Request specific documents in order to activate E-Verify’s photo tool feature;
• Run an E-Verify query for an employee who is waiting for his or her Social Security number to be issued until the employee is issued a Social Security number.

If you are an employer and are not already E-Verify participant, we would be happy to discuss the options and the needs of your organization to become part of E-Verify.  Please contact us to set up an E-Verify appointment and evaluation.

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.

A memorandum dated May 20, 2009 by Barbara Velarade provides some guidance to the USCIS Service Centers with respect to the standards for adjudicating H-1B petitions filed on behalf of beneficiaries seeking employment in a health care specialty occupation.

Generally, the Velarde memorandum provides two kinds of guidance, one for beneficiaries with a license and one for beneficiaries who do not.  We will review each in turn.

Beneficiaries Who Have a License

According to the memorandum, when the USCIS adjudicator reviews H-1B application where the beneficiary has provided documentary evidence of his or her valid license to practice a health care occupation in the state in which the beneficiary will be employed, the adjudicator should not look beyond the license and should accept its validity on its face.

If the beneficiary has an unrestricted license the adjudicator should approve the petition for up to three years (or the maximum permissible depending on the LCA validity period and other circumstances).  The fact that a license has to be renewed periodically, for example, every year, should not prevent the adjudicator from issuing a 3-year H-1B visa.

On the other hand, if the beneficiary has restricted license, the adjudicator should approve the petition for one year only or the duration of the restricted license, whichever is longer.

Beneficiaries Who Do Not Have a License

Generally, in order to perform a health care occupation, the beneficiary must obtain a license from the state in which the beneficiary will be employed.  If the H-1B petition claims that the beneficiary cannot obtain a license due to the fact that the beneficiary needs to obtain a social security (SSN) card or a valid work authorization document, then the adjudicator is asked to determine the requirements for obtaining license and whether the beneficiary is qualified to perform the specialty occupation.  Additionally, the beneficiary will have to show that he or she (1) has filed an application for license and (2) cannot obtain a full unrestricted license due to the requriements of possessing a SSN card or valid immigration document in the form of a letter from the State Board.

Assuming the H-1B petition is approvable in accordance with the standards set forth in the memorandum, the validity period should be one year.   Subsequent requests for extension must include evidence that the beneficiary has been granted a valid unrestricted license to practice the health care occupation.  Failure to provide such evidence will result in the denial of the H-1B extension  petition.

The Optional Practical Training (OPT) program allows foreign students on F-1 visa to work for 12 (or up to 29 months, for holders of STEM degrees).  The 12 (or 29) month period allows many students to apply for an H-1B work visa.  Many employers (and OPT holders alike) are unaware of what happens when the OPT document expires while the H-1B application is pending.  This guide seeks to provide some answers.

The Cap Gap

If the employer employs an F-1 nonimmigrant student on post-completion (OPT) and that student is the beneficiary of a pending or approved H-1B petition, the student may be able to continue working beyond the expiration date on his or her employment authorization document (EAD).   In recent years, the number of H-1B petitions filed per year has exceeded the annual cap. Due to demand, the annual cap of 65,000 H-1B visas has been met during the initial filing period, beginning on April 1. All  cap-subject petitions filed during this initial filing period indicate a requested start date of October 1 (the start of the government fiscal year). In the past, F-1 students who were the beneficiaries of an H-1B petition often had their F-1 status expire before their H-1B status began on October 1 –- a period known as the cap gap. The most common situation occurred when a student’s OPT ended in the spring or early summer, and the student’s F-1 status expired 60 days after that, leaving a gap of several months before the individual’s H-1B status began on October 1.

The OPT Interim Final Rule

On April 8, 2008, the Department of Homeland Security published an Interim Final Rule (IFR) titled, Extending Period of Optional Practical Training by 17 Months for F-1 Nonimmigrant Students With STEM Degrees and Expanding Cap-Gap Relief for All F-1 Students With Pending H-1B Petitions. The changes made by this rule became effective upon publication of the rule.

One provision of the rule applies to F-1 students who are the beneficiaries of a pending or approved H-1B petition that is subject to the annual cap. The IFR automatically extends the F-1 status and, for students in a period of approved post-completion OPT when the H-1B petition is filed, the OPT employment authorization.

The cap-gap extension of OPT is automatic for eligible students. A student does not file an application for the extension or receive a new EAD to cover the additional time. The only proof of continued employment authorization currently available to an affected student is an updated Form I-20 showing an extension of OPT, on page 3. This document serves as proof of continued employment authorization.  However, this automatic extension of an F-1 student’s duration of status and employment authorization is terminated upon the rejection, denial, or revocation of the H-1B petition filed on the F-1 student’s behalf.

Student’s Obligations

A student who is eligible for the cap-gap extension must work with a designated school official (DSO) at the student’s school to receive an updated Form I-20. If a student is eligible for the cap-gap extension of OPT, the student can continue to work while the update to his or her Form I-20 is being processed. Because the cap-gap extension is automatic, the updated Form I-20 is not required for a student to continue working; it merely serves as proof of the extension of OPT employment authorization.

Employer’s Obligations

To assist a student in obtaining an updated Form I-20, the employer may need to provide the student with an I-797 receipt or approval notice issued by USCIS for the H-1B petition filed on the student’s behalf.  This receipt notice serves as proof of filing the H-1B petition and may need to be submitted to SEVP in order to update a student’s Form I-20 to show eligibility for the cap-gap extension.

We wrote last week about the new Employer Handbook which was released by USCIS in connection with the revised Form I-9.  The revised version of Form I-9 becomes mandatory on April 3, 2009 (barring any last-minute change by the Obama administration).  Employers will have to complete the new Form I-9 for all newly hired employees to verify their credentials and authorization to work in the United States.

Obtain the new version of Form I-9.