1. New USCIS Memo on Employer-Employee Relationship for H1B Applications:
What YOU Need To Know
Murali Bashyam, Partner
Ame Coats, Senior Counsel
Bashyam Spiro LLP

2. The Evolution of the H-1B Application Process
Professional Duties/Professional Employee/Company Legit
Vendor Contracts
(3) End Client Letters
Only(1) Was Required, Then…
+(2) + (3) = Inconsistent Decisions

3. So What Did Employers and Attorneys Look Like in 2009?

4. THE MEMO
January 2010: USCIS issued a memo clarifying what constitutes a valid employer-employee relationship to qualify for the H-1B ‘specialty occupation’ classification.
The memo also discusses the types of evidence petitioners may provide to establish that an employer-employee relationship exists and will continue to exist with the beneficiary throughout the duration of the requested H-1B validity period.

5. WHO DOES THE MEMO AFFECT?
H1B beneficiary/employee performing work at a third-party (end-client) worksite.
Ex: IT consulting, independent contractors, healthcare staffing, etc.

6. Employer – Employee Relationship
Master/Servant Relationship
What’s the Bottom Line? CONTROL
What Does ‘Control’ Mean? SUPERVISION
But What About Hiring, Firing, Benefits, Taxes, etc.?
USCIS MIGHT NOT CARE!

7. But What Does The Regulation Say?
8 CFR 214.2(h)(4)(ii) defines the term ‘United States employer’.
Engages a Person to Work Within the United States;
Has an Employer-Employee Relationship with Respect to Employees Under this Part, as Indicated by the Fact That it May Hire, Pay, Fire, Supervise, or Otherwise Control the Work of Any Such Employee; and
Has an Internal Revenue Tax Identification Number
Neufeld Memo Says The Regulation “Lacks Guidance”

8. QUESTIONS OF “CONTROL“
Does the petitioner supervise the beneficiary and is such supervision off-site or on-site?
If the supervision is off-site, how does the petitioner maintain such supervision?
Does the petitioner have the right to control the work of the beneficiary on a day-to-day basis if such control is required?
Does the petitioner provide the tools or instrumentalities needed for the beneficiary to perform the duties of employment?
Does the petitioner hire, pay, and have the ability to fire the beneficiary?
Does the petitioner evaluate the work-product of the beneficiary, i.e. progress/performance reviews?
Does the petitioner supervise the beneficiary and is such supervision off-site or on-site?
- Establish a System of Weekly or Monthly Reviews.
- Document Dates and Substance of Discussion with Employees.
If the supervision is off-site, how does the petitioner maintain such supervision, i.e. weekly calls, reporting back to main office routinely, or site visits by the petitioner?
- See Above
- Are Site Visits By Petitioner Practical? In Most Cases, No. Make Sure to Document Telephonic Reviews.
Does the petitioner have the right to control the work of the beneficiary on a day-to-day basis if such control is required?
- Do You Set The Employee’s Work Hours?
- Do You Analyze The Quality of The Work?
- If Such Control Is Required? What Do They Mean By That?
Does the petitioner provide the tools or instrumentalities needed for the beneficiary to perform the duties of employment?
- This Means Things Like Computers (ie. Laptops), Printers or Any Other Job-Related Software.
- If so, Document It.
Does the petitioner hire, pay, and have the ability to fire the beneficiary?
- Employment Agreement or Offer Letter Should Address This
Does the petitioner evaluate the work-product of the beneficiary, i.e. progress/performance reviews?
- Get Product Implementation Target Guidelines from On-Site Project Manager
- Evaluate Targets With E’EE Through Periodic Performance Reviews
- Document!

9. QUESTIONS CONTINUED
Does the petitioner claim the beneficiary for tax purposes?
Does the petitioner provide the beneficiary any type of employee benefits?
Does the beneficiary use proprietary information of the petitioner in order to perform the duties of employment?
Does the beneficiary produce an end-product that is directly linked to the petitioner's line of business?
Does the petitioner have the ability to control the manner and means in which the work product of the beneficiary is accomplished?
Does the petitioner claim the beneficiary for tax purposes?
- Should be W-2 Employees for Tax Purposes
Does the petitioner provide the beneficiary any type of employee benefits?
- Medical Insurance, Paid Vacations, Travel Allowances, Bonuses, etc.
Does the beneficiary use proprietary information of the petitioner in order to perform the duties of employment?
- Easy to Prove for On-Site Product Implementation
- Harder to Prove for Sole Consulting Companies
- Does the IT Consulting Company Focus on One Area? For Example, SAP. Does the Company Provide Training to The Employee in The Area? If Yes, Document.
Does the beneficiary produce an end-product that is directly linked to the petitioner's line of business?
- Very Complicated To Prove for IT Consulting Companies; However, Can ‘Consulting’ Be Considered The End-Product?
- Easier to Prove for On-Site Product Implementation
Does the petitioner have the ability to control the manner and means in which the work product of the beneficiary is accomplished?
- Basically, Can You Tell The E’EE How to Perform The Duties At The Client Site?
- If Yes, Document the Details
- Might Be Difficult for Pure Consulting Companies

10. Memo Shuts Down H-1B Entrepreneurs
Owner of a Business Not Eligible for H-1B Status Even If:
A Viable Corporation is Established
There is No Third-Party Placement
The Corporate Petitioner Pays The Beneficiary
The Beneficiary Is Claimed for Tax Purposes
The Beneficiary Produces Goods/Services Tied To Petitioner’s Business
Are These Government Policies Smart During A Bad Economy?

11. H-1B EXTENSIONS
Records compiled during the beneficiary’s period of previously approved H-1B status;
Beneficiary's pay records
Beneficiary's payroll summaries and/or Form W-2s, evidencing wages paid to the beneficiary
Time Sheets
prior years' work schedules
Documentary examples of work product
Dated performance review(s); and/or
Employment history records
Copies of the beneficiary's pay records (leave and earnings statements, and pay stubs, etc.) for the period of the previously approved H-1B status;
Copies of the beneficiary's payroll summaries and/or Form W-2s, evidencing wages paid to the beneficiary during the period of previously approved H-1B status;
Copy of Time Sheets during the period of previously approved H-1B status;
Copy of prior years' work schedules;
Documentary examples of work product created or produced by the beneficiary for the past H-1B validity period, (i.e., copies of: business plans, reports, presentations, evaluations, recommendations, critical reviews, promotional materials, designs, blueprints, newspaper articles, web-site text, news copy, photographs of prototypes, etc.). Note: The materials must clearly substantiate the author and date created;
Copy of dated performance review(s); and/or
Copy of any employment history records, including but not limited to, documentation showing date of hire, dates of job changes, i.e. promotions, demotions, transfers, layoffs, and pay changes with effective dates.

12. CONTROL AND APPROVAL
If We Prove That We Will Control Our Employee’s Work, Will Our H-1B Application Be Approved?
New Memo:
Too early to note trends
Need To See How USCIS Applies it in Practice
AILA Litigation:
Memo vs. Regulation
Proceed from Position of Strength:
The More Documents You Have to Comply with USCIS Memo , The Better!

13. What Do Employers Need To Do?
The Wise Adapt Themselves to Circumstances, as Water Moulds Itself To A Pitcher – Chinese Proverb
What Do Employers Need To Do?
ADAPT

14. GLIMPSE INTO THE FUTURE
Employers whose business model may be viewed by the USCIS as within the third-party placement are likely to face RFEs in their H1B petitions.
Review:
indicators of control
anticipate the need to prove control over their employees
modify practice to incorporate the factors to establish a direct employer-employee relationship

15. RECOMMENDATIONS
Consider Filing H-1B Extensions As Early As Possible To Provide A ‘Cushion’ In The Event of A Bad RFE
Establish Company Wide Review Policy
Revise Contracts/Letters With Vendors and Clients
- You Have Right To Control Work
- You Have Right To Get Assignments From End-Client and Reassign E’EE
Pay All Job-Related Expenses for E’EE
Once Policy is Set, Document It!

16. QUESTIONS?
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