Shifting H-1B Standards – In-House vs. End Client Adjudication Trends

The H-1B program has come under scrutiny in recent years, with critics claiming the program is being used to replace U.S. workers with lower-paid foreign workers. Since President Donald Trump signed the “Buy American, Hire American” executive order on April 18, 2017, the Department of Homeland Security has made a series of changes to adjudication processes through policy memoranda. The executive order put a special emphasis on the H-1B program and directed the Secretary of Homeland Security to “suggest reforms to ensure that H-1B visas are awarded to the most-skilled or highest-paid petition beneficiaries.”

RFEs and Denials Increase in FY2017

A recent report by the National Foundation for American Policy (a non-partisan group) found that denials and Requests for Evidence (RFEs) increased soon after the “Buy American, Hire American” executive order was signed. From the third to fourth quarter of FY2017, “the proportion of H-1B petitions denied for foreign-born professionals increased by 41%… rising from a denial rate of 15.9% in the 3rd quarter to 22.4% in the 4th quarter.” RFEs also jumped from 63,599 in the first three quarters combined to 63,184 in the fourth quarter, causing the rate of RFEs to completed cases to jump from 23% in the third quarter to 69% in the fourth quarter.

This increased rate of RFEs and denials can seem alarming, but the recently released policy memos offer valuable clues as to how the President’s executive order will be implemented and how USCIS has changed expectations and requirements at the case adjudication level. In this H-1B update, we’re going to put on our detective hats to investigate some of the clues USCIS has provided.

Common RFE Topics: Employer-Employee Relationship & Specialty Occupation

The employer-employee relationship and the availability of specialty occupation work have historically been the subject of many RFEs, due to large IT companies utilizing the H-1B visa to employ individuals at third-party worksite locations. Many of the explanatory language describing the employer-employee relationship is derived from a 2010 Memorandum to Service Center Directors titled “Determining Employer-Employee Relationship for Adjudication of H-1B Petitions, Including Third-Party Placements.”

The memo, also known as the Neufeld memo, describes the relationship “as indicated by the fact that it may hire, pay, fire, supervise, or otherwise control the work of any such employee” and puts special emphasis on an employer’s “right to control over when, where, and how the beneficiary performs the job.”

Seasoned H-1B petitioners are accustomed to providing evidence to satisfy USCIS requirements such as proving that the petitioner supervises the beneficiary and can control his or her work on a day-to-day basis, along with nine other potential factors outlined in the memo.

In February of 2018, a new policy memo titled “Contracts and Itineraries Requirements for H-1B Petitions Involving Third-Party Worksites” expanded certain evidentiary criteria from optional to required. While USCIS acknowledges that third-party arrangements “may be a legitimate and frequently used business model,” the memo also states that it is “more difficult to assess whether the petitioner has established that the beneficiary will actually be employed in a specialty occupation or that the requisite employer-employee relationship will exist.” The memo gives a list of possible evidence to include actual work assignments, signed contractual agreements between the petitioner and other companies involved in the beneficiary’s placement, work orders or detailed work statements, or end-client letters with detailed descriptions of the job duties, duration, wages, etc.

Most significantly, the memo enforces that itineraries describing the dates and locations of the services to be provided should be submitted in every petition with multiple third-party worksites, with no exemptions. Prior guidance allowed the request to be made on a case-by-case basis. The itinerary of services should include the dates of each service or engagement, the names and addresses of the employers, and the name, location and telephone numbers for each location where the services will be performed, along with evidence to support each item.

Policy Analysis: In-House vs. Third-Party Standards

While the February itineraries memo specifically targets third-party worksites using the employer-vendor-client model, our office has found that many of the underlying principles governing those adjudications are also being applied to beneficiaries working on in-house projects. Recent RFEs have requested additional evidence to prove the position is a specialty occupation with enough work to satisfy that requirement and that a valid employer-employee relationship exists by requesting evidence to demonstrate that the employer has a right to control the employee’s work. While these subjects have always been the target of RFEs, the specific evidentiary requests are similar to those previously applied to beneficiaries working at off-site locations.

Why is USCIS applying these standards to in-house projects?

USCIS may view in-house projects with companies that typically engage in third party placement as a suspicious deviation from the typical consulting services they provide. Officers are placing these petitions under increased scrutiny to make sure the projects are significant enough to warrant the requested approval period.

Our team may ask for additional project-based evidence to prove that the project is not marginal. If all of the requested documentation is not provided, you may risk receiving an RFE or a denial. If the petition is ultimately approved with less documentation, it may be for a shorter window than the requested validity period. This limits companies from hiring an employee for in-house projects with the intent of then transferring the employee to other client projects.

It is essential to provide complete documentation for an H-1B beneficiary’s in-house projects. Our paralegals and attorneys may request additional job duty details, project plans, presentations, or promotional materials relevant to the project.

If you have any questions about how recent adjudication trends have impacted your labor force, please contact us at info@challalaw.com.