The plain fact of the matter is, Congress, the Department of Labor (DOL), and even USCIS (previously INS) legislated and regulated with staffing companies in mind. These rules explicitly contemplated and discussed staffing agencies, approving of their business model, and discussing how the modern business world relies on these companies.
However, USCIS has taken a new approach to staffing companies, one that has taken a punitive tone towards these H1B petitioners. USCIS has unlawfully increased administrative burdens, and costs, for these companies.
Two of the main issues staffing companies face deal with whether the petitioning company has an “employer employee relationship” with the beneficiary, and whether they have contracts for projects that will keep the employee busy for the duration of the visa validity period.
Despite a long statutory and regulatory history addressing these issues, USCIS decisions make it sound like these are new and undetermined issues of law. Moreover, USCIS own regulations and manuals show its approach on this issue is a recent vintage, unsupportable if challenged in court.
A quick recap of the history of the H1B statute, and regulations shows USCIS has absolutely no authority to adjudicate the employer-employee issue, and its decisions not only exceed its statutory mandate, but are random as Powerball number selection. Additionally, Congress did not require employers to prove where and on which projects employees would be engaged on.
In the 1990 INA, Congress created the H1B category, splitting responsibilities between DOL and USCIS (then INS). Doing a quick word count in the statute, it is clear who is the most involved in the process. USCIS’s role is limited to determining if a “professional” position requires theoretical and practical application of highly specialize knowledge. Congress is devoted far more energy defining DOL’s power to enforce the visa category.
This fact was not lost on DOL. It immediately began the process of creating regulations. In March 1991, DOL stated in the Federal Register (FR) that the intent of the law was to increase the number of high tech workers available to the US economy. If US businesses cannot meet their technology needs, the economy would suffer. DOL requested comments from the public on various issues, including “who can file an LCA.” In other words, who qualifies as an “employer” under the terms of the statute.
In December 1991, DOL published its Notice of Proposed Rule Making (NPRM). This included the text of its proposed rule, and its explanation of the rule. In particular, DOL stated:
Consideration was also given to whether a job contractor should be treated as an employer for H-1B purposes. The term job contractor refers to an employer whose employees perform work at job sites of other employers but who are paid by the job contractor and are its employees. In the proposed regulations, job contractors are treated like any other employer and are bound by the regulations applicable to all H-1B employers…Use of a job contractor will not permit circumvention of this requirement; the proposed regulations.
DOL explicitly stated the job contractors (later called staffing companies) were “employers” authorized by Congress to file LCAs. Included in the proposed rule was the language requiring an employer-employee relationship.
In 1992 INS published its H1B regulation, and adopted verbatim DOL’s definition of employer-employee relationship, and by extension the rationale for the rule. This unimaginative copy and paste job of DOL’s rules indicates that INS had no special ability or expertise in regulating the labor market. An agency regulation that “parrots” statutory language or another agency regulation is not entitled to deference or respect from a reviewing court.
DOL again considered regulations related to job contractors in 1993. The issue was not whether they could file LCAs, but whether they were required to update LCAs each time the employee was moved to a new location. Curiously, DOL defined job contractors in the following terms:
Job contractor means an employer whose employees perform their duties in whole or in part at worksites that are owned, operated, and controlled not by the job contractor, but by an entity with which the job contractor, has a contractual relationship and which displays indicia of an employment relationship with the job contractor's employees (e.g., assignment of tasks; day to day supervision of performance; evaluation of performance).
DOL could not have been clearer. Job contractors do not need complete or even partial supervision over the employee while he/she is working at the contract location.
In 1994 DOL rejected the proposed rule that required updated LCAs every time an employee transferred locations, but continued to interpret the statute to allow “job contractors” to file petitions.
INS proposed updating its own H1B regulations in June of 1998, making it easier for job contractors to file H1B petitions. It noted approvingly on the business model, saying: “the new rule ‘will make the requirements for the H-1B nonimmigrant classification more consistent with the practices of the business world.’” INS conceded that:
many industries in the United States, such as the health care and computer consulting industries, have begun to rely more frequently on the use of contract workers. It has been the experience of the Service that many bona fide businesses which provide contract workers to certain industries under the H-1B classification have experienced difficulty in providing complete and detailed itineraries due to the unique employment practices of such industries. For example, companies which are in the business of contracting out physical therapists or computer professionals often get requests from customers to fill a position with as little as 1 day advance notice. Clearly an H-1B petitioner in this situation could not know of all particular contract jobs at the time that it first files the H-1B petition with the Service. As a result, many such bona fide employment contractors do not know all of the locations where a contract worker will be employed at the time the Form I-129, Petition for a Nonimmigrant Worker, is initially filed.
In October 1998, Congress passed ACWIA, which expanded the number of H1B visas and gave DOL sweeping new powers to regulate the LCA process. Congress made factual findings that accompanied the law, and noted that the nation lacked sufficient IT workers, this deficit was damaging the economy, and an increase in visas was necessary to meet the need.
In 1999 DOL created new regulations to implement its new powers under ACWIA. It changed verbiage from “job contractor” to “staffing company,” and stated these companies were employers for H1B purposes.
In a follow up posting in the FR, DOL noted that ACWIA required certain employers to show an attempt to recruit US workers using the “industry standard.” DOL noted that staffing companies were not an industry unto themselves, but must follow the industry standard for the industry the employee will work in.
In its final rule making DOL noted that ACWIA expanded the definition of “employer.” DOL discussed that the petitioning employer and the business receiving the employee both would qualify as employers. Citing the EEOC’s definition, DOL stated the operative definition of employer is more expansive under the new law. It was necessary to take a broad interpretation of this law in order to protect US workers.
The statutory and regulatory history of the H1B visa shows: a clear acceptance of the staffing company business model; an expanding definition of who is an “employer” for LCA purposes; and, an acceptance that staffing companies are not required to show where these employees will work for the duration of their visa.
Yet, USCIS RFEs and denials have turned their back on established statutory and regulatory guidance. USCIS has even abandoned its own interpretation of the law, and has adopted a restrictive interpretation of not only who qualifies as an employer, but also requires proof of contracts that will employ the H1B employee for the duration of the visa.
A federal court reviewing a USCIS denial on these grounds would be forced to grapple with these questions:
Did Congress intend to create two different definitions of the term “employer?”
If not, who did Congress give authority to define the term?
The obvious answer to the first question is “no.”
The second question is just as easily answered. Courts will defer to DOL’s definition of the term because it is the agency with authority to define terms related to the US labor market, and under the statute USCIS is limited to determining if the position is a specialty occupation. Moreover, USCIS has changed its interpretation of this term in violation of the APA.
The issue is not even close. USCIS is violating its role under the statute.
The other question the courts must answer is whether it is reasonable to demand staffing companies show contracts that will keep the employee busy for the duration of the visa.
There are no guarantees in law, but I can’t see a court siding with USCIS on these issues.