In likely its last “midnight rule,” the Department of Homeland Security (DHS) plans to publish a more limited version of its Strengthening the H-1B Nonimmigrant Visa Classification Final Rule (the “Final Rule”). With the twin goals of aligning the H-1B regulations with the Immigration and Nationality Act and improving the integrity of the H-1B program, the Final Rule targets employers who assign H-1B workers to third-party worksites, requiring those employers to establish a valid “employer-employee” relationship. After the interim final rule’s attempt to redefine what constitutes a “specialty occupation” was invalidated by a federal court in December 2020, DHS has made clear that the agency “will not finalize the changes to any other provisions implemented by the interim final rule (IFR), as DHS plans to pursue future rulemaking for those provisions.”

New Standard for Assessing “Employer-Employee Relationships”

Applying common law principles, DHS outlined a non-exhaustive list of factors that US Citizenship and Immigration Services (USCIS) will consider in determining if an H-1B petitioner maintains a valid employer-employee relationship with a sponsored foreign national. Those include whether the H-1B sponsor:

  1. Supervises the H-1B worker, including how the H-1B petition maintains such supervision when the H-1B worker is assigned to a third-party worksite;
  2. Has the right to control the work of the beneficiary on a day-to-day basis and to assign projects;
  3. Has the ability to control the manner and means in which the work product of the beneficiary is accomplished;
  4. Provides the tools or instrumentalities needed for the H-1B worker to perform the duties of employment;
  5. Hires, pays, and has the ability to fire the H-1B worker;
  6. Evaluates the work-product of the H-1B worker;
  7. Claims the H-1B worker as an employee for tax purposes; and
  8. Provides the H-1B worker employee benefits.

DHS will also consider whether the sponsored H-1B employee:

  1. Uses proprietary information of the H-1B sponsor to perform the duties of employment; and
  2. Produces an end-product that is directly linked to the H-1B sponsor’s line of business.

The Final Rule confirms USCIS will consider all factors in determining whether a valid employer-employee relationship exists, with no one factor determinative. The agency also identified additional factors for consideration where the H-1B worker owns part of the H-1B sponsor’s business.

How Employers Can Establish a Valid “Employer-Employee” Relationship

DHS outlines that, when assigning H-1B workers to third-party worksites, employers must produce “contracts, work orders, or other similar evidence” to evidence the terms and conditions of the H-1B employment and that H-1B worker will have sufficient specialty occupation work. Employers may also produce a “summary of the terms of the oral agreement” under which an H-1B worker will work, if a written contract does not exist, or “a detailed letter signed by an unauthorized official of the ultimate end-client company.” DHS makes clear that uncorroborated statements by H-1B sponsors are “generally insufficient” to establish these facts.

Notably, the Final Rule does not impose additional “itinerary” requirements on employers, which were outlined in the February 2018 Memorandum that USCIS issued but later rescinded after litigation on its legality. DHS estimates that H-1B sponsors should expect to spend “approximately 1 hour of work to gather and submit” this corroborating evidence into their H-1B petitions.

January 21, 2021 Update

At the time of the publication of this original blog post on January 18, the Final Rule was expected to be published in the Federal Register on January 19 before the inauguration and presidential transition.  The publication did not take place and the rule has thus been withdrawn, pursuant to President Biden’s executive order placing a regulatory freeze on certain agency rules and regulations.