May 01 2009
On February 12 2009 a federal taskforce conducted a seven-state sweep netting 11 arrests and a forfeiture claim of $7.4 million against a New Jersey-based technology consulting company, Vision Systems Group (VSG). The company's alleged offence was supplying H-1B workers to client sites in apparent violation of the terms of its labour condition attestations.
This news was received with alarm and a number of IT contracting firms and immigration lawyers have asked whether this signals the criminalization of H-1B employment for consulting firms. Examining the details of the case, the general answer is no - it is still perfectly legal for H-1B workers to be assigned temporarily to client sites, even in the IT industry.
However, when the details are considered, the VSG Case shows that US Citizenship and Immigration Services (USCIS) is reviewing applications for temporary workers for consulting firms with particularly intense scrutiny and some arbitrariness in adjudications. This has led to some crude attempts at evasion, increasingly resulting in prosecutions for what the agency terms 'benefits fraud'. Although USCIS cannot independently make law - Congress has not barred H-1Bs for IT consultants as a particular class and is unlikely to do so - it can deter certain categories of filing and is targeting those who do clearly break the law with a particular fury.
The VSG prosecution raises a number of more complex legal questions which the immigration bar - and, presumably, federal agencies - are still working their way through to try to find workable rules in lieu of both bright-line legality and black-letter prohibition. Interested parties should pay close attention to what is a new emerging set of rules for H-1B outsourcing.
The question to be considered is whether an IT consultant employed as an H-1B worker may be assigned for temporary assignment at a client worksite and, while working there, report directly to a manager of the end client.
The answer is as follows. A H-1B worker may be temporarily assigned to a client worksite and may even report to a client manager, provided that certain conditions are met. Three basic principles need to be considered and addressed by H-1B consultants, their petitioning employers and client companies:
In order to avoid violation of the terms of status as specified in the original H-1B petition and labour condition attestation, the original petitioning employer may have to take additional steps to amend the petition and file a new labour condition attestation or a second H-1B petition may have to be filed by the end client for the worker.
Whether an amended petition must be filed by the original employer depends on the period of time for which the worker will be assigned off-site. The general rule for duration is as follows:
"[A] H-1B in the US under [a labour condition attestation] may be sent to a new worksite which is not covered by [a labour condition attestation] 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 US residence or place of abode is located in the area of the permanent worksite."(1)
The section 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 non-immigrant(s) to any worksite where there is a strike or lockout in the course of a [labour] dispute in the same occupational classification(s) as that of the H-1B non-immigrant(s).
(3) For every day the H-1B non-immigrant(s) is placed or assigned outside the area(s) of employment listed on the approved [labour condition attestation](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)."
A second category of short-term H-1B employees is addressed by regulations issued by the Department of Labour - this is very short-term or itinerate employment at client sites by so-called 'roving' H-1Bs.
Occasional travel and roving employees
Department of Labour regulations published in 2000 define a new type of H-1B employee whose work is 'peripatetic' (roving) in nature, in that the normal duties of the occupation require frequent travel.(2) 'Peripatetic' is included under the definition of 'place of employment'. Peripatetic workers may travel constantly, but may not spend more than five days at the same location. For such peripatetic workers, a new location is not considered a new worksite and therefore does not require a new labour condition attestation.
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 labour condition attestation requirements.
A section of these regulations is worth reproducing at length as it captures the Department of Labour's current definition and interpretation of permissible short-term employment at client sites. It illustrates examples of permissible off-site and client site activities, such as training, attendance at conferences, managing outsourced employees, auditing and troubleshooting activities, which are permitted even though the events and/or worksite functions are not controlled by the H-1B petitioning employer.(3)
"(i) Employee developmental activity. [A] H-1B worker who is stationed and regularly works at one location may temporarily be at another location for a particular individual or employer-required developmental activity such as a management conference, a staff seminar, or a formal training course (other than 'on-the-job- training' at a location where the employee is stationed and regularly works). For the H-1B worker participating in such activities, the location of the activity would not be considered a 'place of employment' or 'worksite', and that worker's presence at such location - whether owned or controlled by the employer or by a third party - would not invoke H-1B program[me] requirements with regard to that employee at that location. However, if the employer uses H-1B non-immigrants as instructors or resource or support staff who continuously or regularly perform their duties at such locations, the locations would be 'places of employment' or 'worksites' for any such employees and, thus, would be subject to H-1B program[me] requirements with regard to those employees.
(ii) Particular worker's job functions. The nature and duration of [a] H-1B non-immigrant's job functions may necessitate frequent changes of location with little time spent at any one location. For such a worker, a location would not be considered a 'place of employment' or 'worksite' if the following three requirements (ie, paragraphs (1)(ii)(A) through (C)) are all met:
(A) The nature and duration of the H-1B worker's job functions mandates his/her short-time presence at the location. For this purpose, either:
(1) The H-1B non-immigrant's job must be peripatetic in nature, in that the normal duties of the worker's occupation (rather than the nature of the employer's business) require frequent travel (local or non-local) from location to location; or
(2) The H-1B worker's duties must require that he/she spend most work time at one location but occasionally travel for short periods to work at other locations; and
(B) The H-1B worker's presence at the locations to which he/she travels from the 'home' worksite is on a casual, short-term basis, which can be recurring but not excessive (ie, not exceeding five consecutive workdays for any one visit by a peripatetic worker, or 10 consecutive workdays for any one visit by a worker who spends most work time at one location and travels occasionally to other locations); and
(C) The H-1B non-immigrant is not at the location as a 'strikebreaker' (ie, the H-1B non-immigrant is not performing work in an occupation in which workers are on strike or lockout)...
(2) Examples of 'non-worksite' locations based on worker's job functions: a computer engineer sent out to customer locations to 'troubleshoot' complaints regarding software malfunctions; a sales representative making calls on prospective customers or established customers within a 'home office' sales territory; a manager monitoring the performance of out-stationed employees; an auditor providing advice or conducting reviews at customer facilities; a physical therapist providing services to patients in their homes within an area of employment; an individual making a court appearance; an individual lunching with a customer representative at a restaurant; or an individual conducting research at a library.
(3) Examples of 'worksite' locations based on worker's job functions: a computer engineer who works on projects or accounts at different locations for weeks or months at a time; a sales representative assigned on a continuing basis in an area away from his/ her 'home office'; an auditor who works for extended periods at the customer's offices; a physical therapist who 'fills in' for full-time employees of healthcare facilities for extended periods; or a physical therapist who works for a contractor whose business is to provide staffing on an 'as needed' basis at hospitals, nursing homes, or clinics.
(4) Whenever [a] H-1B worker performs work at a location which is not a 'worksite' (under the criterion in paragraph (1)(i) or (1)(ii) of this definition), that worker's 'place of employment' or 'worksite' for purposes of H-1B obligations is the worker's home station or regular work location. The employer's obligations regarding notice, prevailing wage and working conditions are focused on the home station 'place of employment' rather than on the above-described location(s) which do not constitute worksite(s) for these purposes. However, whether or not a location is considered to be a 'worksite'/ 'place of employment' for [a] H-1B non-immigrant, the employer is required to provide reimbursement to the H-1B non-immigrant for expenses incurred in traveling to that location on the employer's business, since such expenses are considered to be ordinary business expenses of employers (Secs 655.731(c)(7)(iii)(C); 655.731(c)(9)). In determining the worker's 'place of employment' or 'worksite', the department will look carefully at situations which appear to be contrived or abusive; the department would seriously question any situation where the H-1B non-immigrant's purported 'place of employment' is a location other than where the worker spends most of his/her work time, or where the purported 'area of employment' does not include the location(s) where the worker spends most of his/her work time...Id. This type of situation is also covered under the 'place of employment' definition."(4)
The short-term placement rules permit a H-1B worker to travel up to a total of 30 or 60 days per year to another place of employment. However, the employer may not use the short-term placement rules for assignments in the same area of employment (defined as the same metropolitan statistical area) for which the employer has a certified labour condition attestation for the occupational classification. Assignments or transfers to other offices or facilities owned or affiliated with the same H-1B petitioning employer within the same metropolitan statistical area may be made without filing an amended petition or new labour condition attestation as this is not considered to be a material change in employment provided the duties remain substantially unchanged.
If the employer has such a certified labour condition attestation with an open job at a client site within the same metropolitan statistical area as the employee's normal H-1B workplace, then the employer must use that and add a copy of that labour condition attestation to the employee's public access file. If the employer has a certified labour condition attestation, but does not have any open jobs, then the employer must file a new labour condition attestation.(5)
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 labour condition attestation.(6)
The filing of a new labour condition attestation may still require the filing of an amended H-1B petition due to material change in employment.
The exception to the employer control rule applies only to casual, very short-term assignments and for peripatetic or roving employees. Roving employee occupations are limited to those for which brief assignments to non-worksite locations lasting no more than a few days is the normal industry practice. The H-1B petitioner should make a demonstration to USCIS that peripatetic employment is indeed the normal industry practice when applying for such a limited category of occupations; otherwise the usual requirement is a demonstration of control over the employee at all times.
The option for normal short-term assignment presupposes that the original H-1B employer continues to maintain control over the employment of the H-1B worker while he or she is assigned at the client site, except for casual, short-term assignments or roving employees. In general, the definition of 'control over employment' for this purpose is contained in the following definition:
"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 that 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."(7)
In any filing of an amended petition or second petition, USCIS will look for evidence that the terms of control over the employment and activities of the H-1B employee are clearly spelled out in an agreement between the original employer and the end client. If a copy of a contract or other binding agreement is not included, USCIS will likely issue a request for evidence. That notice normally includes boilerplate language stating, for example:
"[USCIS] accepts that you are the employer, not an agent, and that you retain control over the beneficiary's employment. A copy of the agreement(s) [is] needed to establish that the employment of the beneficiary is not speculative in nature, and that the beneficiary will be employed in fact. [USCIS] regulations specify that aliens admitted to the United States as non-immigrant workers must have services to perform."
Recent Administrative Appeals Office decisions and USCIS Service Centres have denied petitions filed by agents that do not clearly demonstrate that they control all aspects of the employer-employee relationship - that is, "that it may hire, pay, fire, supervise or otherwise control the work of any such employee".(8)
Such a showing has become virtually impossible for entire categories of occupation for which agency employment is not the settled industry norm. Although it can be assumed that petitions for fashion models will continue to be approved for agency employers, USCIS now denies agent petitions for school teachers and other occupations where full-time, direct employment is the norm. While the use of consultants, both short term and long term, is well established in the IT industry, it has become very difficult for IT outsourcing agencies to get petitions approved for H-1B workers assigned to any but the shortest-term assignments at client sites.
Nonetheless, the Department of Labour continues to apply a fairly loose, common law definition of what constitutes a genuine employer-employee relationship. Labour regulations even continue to define labour contractors as legitimate employers. Even if the petition is ultimately denied by USCIS on these or other grounds, the Department of Labour deems any petitioning party to be a legitimate H-1B employer for labour condition attestation purposes. This may have practical significance for portability purposes:
"Employed, employed by the employer or employment relationship means the employment relationship as determined under the common law, under which the key determinant is the putative employer's right to control the means and manner in which the work is performed. Under the common law, 'no shorthand formula or magic phrase... can be applied to find the answer... [A]ll of the incidents of the relationship must be assessed and weighed with no one factor being decisive.' NLRB v United Ins Co of America, 390 US 254, 258 (1968). Employer means a person, firm, corporation, contractor or other association or organization in the United States which has an employment relationship with H-1B non-immigrants and/or US worker(s). The person, firm, contractor or other association or organization in the United States which files a petition on behalf of [a] H-1B non-immigrant is deemed to be the employer of that H-1B non-immigrant."(9)
Attorneys and companies filing H-1Bs have noticed an increase in other restrictive interpretations and the imposition of difficult new evidentiary burdens in IT worker cases. For instance, petitioners are now being required by USCIS service centres to document a number of things that are not obviously related to the statute and regulations, but are now demanded to satisfy agency interpretations and case law.
Audits are another area where enforcement activity can lead to adverse consequences where agency guidance is inadequate to meet auditor of public accounts standards for notice, consistency and essential fairness. Ever more stringent enforcement is raising liability for employers and counsel alike in novel areas where judicial light has not been shined and agency guidance is altogether lacking. Nonetheless, to fail to anticipate and satisfy ad hoc requirements for documentation is to risk loss of benefits or worse. Some recent trends in adjudications and enforcement seen by practitioners include the following.
Requests for evidence requiring copies of contracts
Attorneys are seeing requests for evidence for contracts and work orders, particularly for cases where clients may be consulting companies. In the past, with consulting companies, attorneys rarely provided copies of contracts or work orders between the employer and the end client unless they were requested in a request for evidence, which seldom happened. Now it seems that contracts are required in every case. Production of consistent contracts detailing the arrangement between the H-1B petitioner and beneficiary and the service provider-customer relationships should satisfy the imposed requirement. The petition may even be approved for offsite H-1B employment, provided that employer control or roving employee is established. Certain documents should be produced that will make approval more likely, such as detailed contracts and work orders, shorter-term petitions and joint employment contracts.
Labour condition attestation audits and wage level determinations
The wage level assignment is typically questioned by the Department of Labour Wage and Hour Division during a labour condition attestation audit. For example, one client has had consolidated prevailing wage appeals pending with the Office of Foreign Labour Certification since April 2008 - based on inconsistent occupational and wage level determinations by various state workforce agencies pursuant to the Wage and Hour Division's request for a prevailing wage determination after the onset of a labour condition attestation investigation. The state workforce agencies used the employer's description of the job offered and the alien's prior education and experience (as disclosed in the I-129 cover letter and alien resumés) to support the decisions rendered. Prior employment history will definitely be used against the employer in classifying wage level.
Potential awards for unequal benefits packages
An audit may reveal that an employer did not offer the H-1B worker the same benefits (eg, insurance) as other workers. Comments to the American Competitiveness and Workforce Improvement Act of 1998 regulations suggest that these lost benefits would be calculated by the Department of Labour as lost wages. This raises difficult issues where the agency provides no guidance, such as whether the calculation should be based on the employer's cost of providing the benefits or the costs of medical care incurred by the uninsured employee.
Potential vulnerability to labour condition attestation enforcement actions pursuant to complaints lodged under duress by former H-1B employees
The recent Administrative Appeals Office Ultimo Software decision allows that non-immigrant workers who were not paid the prevailing wage and who file complaints against their former employers may qualify for whistleblower protection. If the alien's request for the unpaid portion of the prevailing wage is rejected by the employer and the employer takes adverse action against him or her, the alien will qualify for H-1B whistleblower protection - he or she will be entitled to full pay until the end of the approval period and will be deemed to be in status through the expiration date as well. Labour condition attestation regulations specifically outline enforcement procedures through the Department of Labour. Under another new decision, the underpaid employee has an incentive to report former employees in order to qualify for an extension of status and potential finding of a Section 222(g) violation that can result in ineligibility for adjustment of status.(10)
Requests for evidence demanding an accounting of all previous H-1B and L-1 petitions filed by the same company
Attorneys have received requests for evidence that ask for a list of "current employment status for ALL previously approved H-1B and/or L-1 employees", including details such as the date employment began, the date employment ended and current immigration status. Some employers have hundreds of H-1B and L-1 employees and have been employing non-immigrants for many years. The notice is non-specific about how far back the accounting needs to go to respond the request for evidence. A reasonable response, where the employer has not kept ongoing records, would be to list all current non-immigrant employees with a notation that if this is not adequate USCIS may contact the employer.
(1) 20 CFR §655.735(c); www.dol.gov/dol/allcfr/title_20/Part_655/20CFR655.735.htm.
(3) Federal Register/2000 (Vol 65); Labour Condition Applications and Requirements for Employers Using Non-immigrants on H-1B Visas in Specialty Occupations and as Fashion Models; Labour Certification Process for Permanent Employment of Aliens in the United States (December 20 2000); 20 CFR Parts 655 and 656).
(8) See, for example, SRC 05 213 51887 (Administrative Appeals Office January 4 2008); www.avlawoffice.com/AAOEstablishingEmployerAgentRelationshipwithH1BTeacher.htm.
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