H-1B Petition Issues: Employer-Employee Relationship
On January 8, 2010, Donald Neufeld, USCIS Associate Director Service Center Operations, released a memorandum ("Neufeld Memo") on the determination of employer-employee relationships for H-1B petitions. The Neufeld Memo contains a detailed discussion of standard for adjudication and provides voluminous lists of suggested documentation for establishing the requisite relationship.
This article reviews the contents of the memo and provides suggestions for H-1B employers, and offers an update on recent developments relating to the issue.
Summary of Neufeld Memo
The Neufeld Memo provides detailed guidance on valid employer-employee relationship requirement for H-1B petitions (8 C.F.R. 214.2(h)(4)(ii)), particularly for third-party placement employers. Drawing from a U.S. Supreme Court case , the memo determines that the H-1B petitioner must prove the right to control when, where and how the employee performs the job.
USCIS then goes on to list eleven (11) different factors to be considered when determining whether the employer-employee relationship exists, including the petitioner's manner of supervision over the employee; whether the petitioner can hire, pay and fire the employee; whether the petitioner provides benefits to the employee; and whether the petitioner claims the employee for tax purposes. The factors are considered under a totality of circumstances test, with no one factor dispositive of the outcome.
The memo provides an extensive list of evidence to establish the employer-employee relationship, for both initial and extension petitions. Examples of relevant documentation are copies of employment agreements; itineraries of services or engagements; copies of signed contractual agreements or statements of work with end-clients; and for extension petitions, prior W-2 forms, pay stubs and performance reviews.
Practical Consequences for H-1B Petitioners
As a result of the Neufeld Memo, H-1B petitioners should provide additional information and documentation in their H-1B initial and extension petitions in order to avoid RFEs and denials.
The most impacted sector has been the IT consulting industry, which commonly places employees at third-party worksites, sometimes through additional intermediate companies. For these third-party placement employer petitioners, some noteworthy key elements to establish are:
- Chain of Relationship: It is important to establish the entire chain of employer-employee relationship with proper documentation (e.g., contractual agreements, master services agreements, and statements of work) leading from the petitioner all the way to the end client. Ideally, the petition should include a letter from the end-client, verifying that the beneficiary is directly employed by the petitioner, describing the duties to be performed, and listing the dates of engagement.
- Duration of H-1B Status Requested: Evidence should be provided to show that the beneficiary will be engaged for the entire duration of H-1B status requested, or USCIS may only grant an approval for the duration of the documented engagement(s).
- Right to Control: Finally, the petitioner should address the specific factors listed in the Neufeld Memo to establish right to control the beneficiary's work, by providing both information in a support letter (e.g., regularly supervises beneficiary, conducts performance reviews, declares beneficiary as employee for tax purposes, has ability to fire beneficiary, provides benefits to beneficiary, etc.) and sufficient documentation (e.g., employment offer letter, employment agreement, organizational chart showing supervisory chain, etc.).
The Neufeld Memo has impacted traditional on-site employer petitioners as well. These employers should at least verify that they have the right to control the employee's work, through the same information and documentation listed above. In addition, when possible the employer should provide a copy of a lease agreement or ownership documentation of the worksite premises.
For extension petitions, proof of prior direct employment (pay stubs, W-2s, work product, etc.) of the beneficiary is strong evidence of valid employer-employee relationship.