Update: Important Tips for H-1B Filings in 2011
With April 1, 2011 rapidly approaching, there are several important issues employers should be aware of this H-1B filing season. Several new procedures and laws were implemented affecting the H-1B petition process in 2010. Employers should be aware and of these changes and ready before the 2012 fiscal year filing season begins.
Beta Testing of VIBE
On May 27, 2010, UCSIS announced the introduction of the Validation Instrument for Business Enterprise (VIBE), a web based tool for adjudicators to validate the business information contained in employment based petitions.
The VIBE system will allow immigration adjudicators to compare employer information to information contained in Dun & Bradstreet databases. The system will be used for certain employment based nonimmigrant petitions, including H-1B petitions (Form I-129), certain employment based immigrant petitions (Form I-140), and certain applications for special immigrant status (Form I-360).
The information in the VIBE system will be used to confirm business activities, financial standing, company size, company relationships, company ownership and management, founding date, and location. Where the employer information does not comport with the information in VIBE, adjudicators will issue a request for evidence (RFE). USCIS has stated that it will not issue Notices of Intent to Deny solely on the basis of VIBE information.
It is to be seen whether the VIBE program will meet the intended goals of reducing fraud and expediting application processing. The likely result is the system will cause increased delays, unnecessary and harassing RFEs, and litigation. Furthermore, the costs to USCIS of utilizing the system may not justify any perceived benefit.
In anticipation of H-1B filings, employers should request a copy of their Dun & Bradstreet profile and provide it to their attorneys. If information in their profiles is inaccurate, employers should update their profiles with Dun & Bradstreet online. The ultimate goal for employers should be to avoid the cost and delay of unnecessary RFEs by providing information comporting with Dun & Bradstreet databases preemptively.
Deemed Export Compliance
Employers allowing foreign nationals access to certain technologies and software have been required to comply with deemed export licensing requirements. This licensing requirement has also applied to employers with H-1B employees. In late 2010, USCIS updated H-1B filing forms to include confirmation of whether an employer is in compliance with deemed export licensing regulations. Employers subject to deemed export rules should ensure they are in compliance before petitioning for an H-1B employee.
The deemed export rule requires that certain technology and source code be subject to licensing under the Export Administration Regulations before it may be exported to a foreign country. Exports include any transfer of the technology or software abroad, including release of the technology or software to a foreign national. If a license is required to export a controlled technology to a country, then a company must obtain a deemed export license before that that technology can be released to any foreign national from that country, including H-1B employees.
The deemed export regulations are complicated. If an employer believes that he deals in technology or software subject to the deemed export rule, the employer should find competent counsel to either obtain the necessary licenses or establish the necessary walls to ensure foreign national employees are not exposed to controlled technology or software.
Neufeld Memo: Imposing Heightened Standards for Demonstrating the Employer-Employee Relationship
On January 8, 2010, USCIS issued a memorandum establishing heightened standards for adjudicators to determine whether a valid employer-employee relationship exists for H-1B employers when the H-1B employee may be placed on third party worksites. Commonly referred to as the "Neufeld Memo," the memorandum attempts to establish clear guidance for what constitutes valid employment when the H-1B employee may be an independent contractor, self-employed, or working on third party worksites.
Utilizing the common law based definitions for employment, the memorandum requires employers to demonstrate that they exert the requisite control over H-1B employees sufficient for an employer-employee relationship. The memo adds that the requisite control may not exist where the employer is in the business of contracting with companies with the primary purpose of fulfilling personnel needs.
The memorandum sets forth a number of factors to demonstrate an H-1B employer exerts the necessary control over an H-1B employee for there to be considered an employer-employee relationship. These factors include:
- 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? (For example, by weekly calls, by requiring the beneficiary to routinely report back to the main office, or by site visits by the petitioner?)
- 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 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 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?
The memorandum provides a list of scenarios demonstrating where there would be a finding of a valid employer-employee relationship and when there would not. Traditional employment, temporary or occasional offsite employment, and certain long term placements supported by contracts between the employer and client and placing the right of control in the employer are deemed proper employer-employee relationships.
Instances that are not considered valid employer-employee relationships for purposes of the H-1B program include self employment where there is no independent control or right to control by the H-1B employer, independent contractors where there is no right of control or exercise of control, and "job" shop scenarios where the employer is simply a middleman for the contracting of work.
The Neufeld Memo also sets out types of evidence that the employer should initially provide to establish a valid employer-employee relationship. This documentation includes contracts, service agreements, and employee letters/contracts setting out the terms of the relationship and control over the work performed.
The Neufeld Memo is widely thought to have a detrimental impact on many industries, including heath care and software development. A lawsuit was filed attempting to enjoin the memorandum as a violation of the notice procedures in the Administrative Procedures Act, however, the suit was filed without sufficient evidence to establish the memo constituted a change in regulation. The Neufeld Memo will remain an additional burden employers will have to deal with for the foreseeable future.
The Neufeld Memo affects many that place their employees on third party worksites as a matter of routine and industry practice. Companies in these industries, and companies even remotely related to these industries should have ready the documentation suggested in the memo for their attorneys. Companies should also provide attorneys with an explanation for how they exert control over the work product of their employees. Small businesses that utilize H-1B workers but pay them as independent contractors should be on notice that the practice violates federal labor and tax laws. The practice may also prevent those companies from extending the status of their H-1B employees.
Significant Filing Fee Increases for Certain H-1B Employers
On August 13, 2010, President Barack Obama signed the Emergency Supplemental Appropriation for Border Security Act into law. The legislation imposed steep new fee increases for certain employers of H-1B and L-1 foreign workers. The provisions of the bill went into effect September 30, 2010.
The Border Security Act of 2010 (Public Law 111-230) requires an additional fee of $2,000 for certain H-1B petitions and $2,250 for certain L-1 petitions. Companies with more than 50 employees of which more than 50% of the employees are on H-1B or L-1 status will be subject to the additional fee for initial petitions for H-1B status and for petitions for change of employers.
The new fee principally affects H-1B employers involved in the software consulting industry that often employ foreign nationals almost exclusively. While these employers would otherwise be subject to sanction as H-1B dependent employers, the companies are exempt from such violations because the employees hired are considered H-1B exempt. H-1B exempt employees include those who are paid more than $60,000 per year or those with masters degrees or higher. The fee increase is meant to check the exclusive use of foreign nationals by these companies in the absence of H-1B violations and encourage the hiring of qualified U.S. workers.
A majority of H-1B employers will not be subject to the new fees. However, employers should be very candid about the number of employees and status of employees to their immigration attorneys in order to avoid unnecessary rejection of H-1B petitions filed under the H-1B cap.
Being Prepared for these New Issues
It is best that employers are prepared for these new issues before petitioning for H-1B employees. Not all attorneys will be up to date on these recent changes as many changes do not affect a large percentage of H-1B employers. However, advanced preparation for these changes may cut down the processing time and the expenses of pursuing the H-1B process.
We at The Chander Law Firm look forward to guiding you through these changes and working with you on your H-1B and other immigration, business, and litigation needs. We look forward to hearing from you in the near future.
Deemed Export Rule:
Border Security Act of 2010:
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