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 H1B Employer Employee Relationship Rule 

What is the New H1B Employer Employee Relationship Rule and How Does it Affect H1B Workers (beneficiaries) and H1B Sponsor Companies (petitioners) ?

On January 13, 2010, the US Citizenship
and Immigration Services (USCIS) issued a Guidance Memorandum to adjudication officers to clarify the requirements needed to establish an employer-employee Relationship in H1B Petitions for foreign workers who will be placed at client work sites, self-employed individuals, business owners, and independent contractors. Per this new memorandum, an H1B Employer who seeks to employ a worker in an H1B profession is now required to establish a valid H1B Employer-Employee Relationship.
Related Pages: H1B Employer Employee Relationship - Questions and Answers

H1B Employer-Employee Relationship

The USCIS will look at a number of factors to determine whether a valid H1B employer-employee relationship exists. Hiring and Sponsoring an H1B worker is more than merely paying the wage or placing that person on the payroll. In considering whether or not there is a valid "H1B employer-employee relationship" for purposes of H1B petition adjudication, the USCIS must determine if the H1B Employer (sponsor company) has a sufficient level of control over the employee.

The USCIS has defined such a relationship to hinge on an H1B Employer's "Right to Control" the means and manner in which the work is performed.

The H1B Employer must be able to establish that it has the right to control over when, where, and how the beneficiary performs the job.

The USCIS will consider the following to make such a determination (with no one factor being decisive):

  1. Does the H1B petitioner supervise the H1B employee / worker and is such supervision off-site or on-site?
  2. If the supervision is off-site, how does the H1B petitioner maintain such supervision, i.e. weekly calls, reporting back to main office routinely, or site visits by the petitioner?
  3. Does the petitioner have the right to control the work of the H1B worker on a day-to-day basis if such control is required?
  4. Does the petitioner provide the tools or instrumentalities needed for the H1B worker to perform the duties of employment?
  5. Does the petitioner hire, pay, and have the ability to fire the H1B employee?
  6. Does the petitioner evaluate the work-product of the H1B worker, i.e. progress/performance reviews?
  7. Does the petitioner claim the H1B employee for tax purposes?
  8. Does the petitioner provide the H1B worker any type of employee benefits?
  9. Does the H1B employee use proprietary information of the petitioner in order to perform the duties of employment?
  10. Does the beneficiary produce an end-product that is directly linked to the petitioner's line of business?
  11. Does the petitioner have the ability to control the manner and means in which the work product of the H1B worker is accomplished?

Third Party Placement Does Not Qualify

The USCIS has clearly stated that the following example of "Third-Party Placement / Job Shop" does NOT evidence an employer-employee relationship because the H1B Employer neither has a Right to Control nor Exercise of Control over the employee:

"The petitioner is a computer consulting company. The petitioner has contracts with numerous outside companies in which it supplies these companies with employees to fulfill specific staffing needs. The specific positions are not outlined in the contract between the petitioner and the third-party company but are staffed on an as-needed basis. The beneficiary is a computer analyst. The beneficiary has been assigned to· work for the third-party company to fill a core posjtion to maintain the third-party company's payroll. Once placed at the client company, the beneficiary reports to a manager who works for the third-party company. The beneficiary does not report to the petitioner for work assignments, and all work assignments are determined by the third-party company. The petitioner does not control how the beneficiary will complete daily tasks, and no propriety information of the petitioner is used by the beneficiary to complete any work assignments. The beneficiary's end-product, the payroll, is not in any way related to the petitioner's line of business, which is computer consulting. The beneficiary's progress reviews are completed by the client' company, not the petitioner."

Documentation to Establish the H1B Employer-Employee Relationship

Per this new memorandum, H1B Employers must clearly show that an employer-employee relationship will exist between the employer and employee, and establish that the employer has the right to control the employee's work, including the ability to hire, fire and supervise the beneficiary. The petitioner must also be responsible for the overall direction of the beneficiary's work. Lastly, the H1B Employer should be able to establish that the above elements will continue to exist throughout the duration of the requested H1B validity period. The petitioner can demonstrate an employer-employee relationship by providing a combination of the following or similar types of evidence: 

  1. A complete itinerary of services or engagements that specifies the dates of each service or engagement, the names and addresses of the actual employers, and the names and addresses of the establishment, venues, or locations where the services will be performed for the period of time requested;
  2. Copy of signed Employment Agreement between the petitioner and beneficiary detailing the terms and conditions of employment;
  3. Copy of an employment offer letter that clearly describes the nature of the employer employee relationship and the services to be performed by the beneficiary;
  4. Copy of relevant portions of valid contracts between the petitioner and a client (in which the petitioner has entered into a business agreement for which the petitioner's employees will be utilized) that establishes that while the petitioner's employees are placed at the third-party worksite, the petitioner will continue to have the right to control its employees;
  5. Copies of signed contractual agreements, statements of work, work orders, service agreements, and letters between the petitioner and the authorized officials of the ultimate end-client companies where the work will actually be performed by the beneficiary, which provide information such as a detailed description of the duties the beneficiary will perform, the qualifications that are required to perform the job duties, salary or wages paid, hours worked, benefits, a brief description of who will supervise the beneficiary and their duties, and any other related evidence;
  6. Copy of position description or any other documentation that describes the skills required to perform the job offered, the source of the instrumentalities and tools needed to perform the job, the product to be developed or the service to be provided, the location where the beneficiary will perform the duties, the duration of the relationship between the petitioner and beneficiary, whether the petitioner has the right to assign additional duties, the extent of petitioner's discretion over when and how long the beneficiary will work, the method of payment, the petitioner's role in paying and hiring assistants to be utilized by the beneficiary, whether the work to be performed is part of the regular business of the petitioner, the provision of employee benefits, and the tax treatment of the beneficiary in relation to the petitioner;
  7. A description of the performance review process; and/or
  8. Copy of petitioner's organizational chart, demonstrating beneficiary's supervisory chain.

H1B Extensions

If an H1B Employer is seeking to extend H1B employment for an employee, the H1B Employer must continue to establish that a valid employer-employee relationship exists. The H1B Employer can do so by providing evidence that it continues to have the right to control the work of the employee, as described above. The H1B Employer may also include a combination of the following or similar evidence to document that it maintained a valid employer-employee relationship with the employee throughout the initial H1B visa status approval period:  

  1. Copies of the beneficiary's pay records (leave and earnings statements, and pay stubs, etc.) for the period of the previously approved H1B status;
  2. Copies of the beneficiary's payroll summaries and/or Form W-2s, evidencing wages paid to the beneficiary during the period of previously approved H1B status;
  3. Copy of Time Sheets during the period of previously approved H1B status;
  4. Copy of prior years' work schedules;
  5. Documentary examples of work product created or produced by the beneficiary for the past H1B 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;
  6. Copy of dated performance review(s); and/or
  7. 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.

If USCIS determines, while adjudicating the extension petition, that the petitioner failed to maintain a valid H1B employer-employee relationship with the beneficiary throughout the initial approval period, or violated any other terms of its prior H1B petition, the extension petition may be denied.

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