New Definition of Employer Broadens Requirements for H-1B Employers
The US Department of Homeland Security (DHS) released a new Final Rule (FR) on Friday afternoon that is to be published shortly. This FR is to take effect 180 days from the date of publication and is entitled “Strengthening the H-1B Nonimmigrant Visa Classification Program.” In essence, it broadens the definition of an “employer-employee relationship” and could require end-users of H-1B professionals also to file H-1B petitions. Likewise, on the same day, the Office of Foreign Labor Certification (OFLC) of the US Department of Labor (DOL) and its enforcement branch the Wage and Hour Division (WHD) issued bulletins requiring the same newly defined “employers” also to file and comply with requirements of the Labor Condition Applications where they did not have to do so before.
Regulations require an H-1B professional to be sponsored by a U.S. employer and such employers are defined by “the fact that it may hire, pay, fire, supervise, or otherwise control the work of any such employee.” The FR changes the definition and broadens it to include those who may meet the common law test of an “employer-employee relationship.” Practically, those entities who have used the services of H-1B professionals may now need to file a separate H-1B petition for them.
The FR indicates that this is only a minor change and it issued to clarify the definition of a “US employer.” According to the proposed rules, there is a list of factors now to consider as to whether an entity is a “US employer” and a separate H-1B petition is required. The DOL followed suit and said that if the DHS is taking this stance on defining an employer-employee relationship, then it too can require these new employers to file corresponding Labor Condition Applications and comply with notice, wage, and benefits requirements that did not exist before. You decide whether this is “minor.”
The proposed regulatory language defining an “employer” follows:
(1) In cases where the H-1B beneficiary does not possess an ownership interest in the petitioning organization or entity, the factors that USCIS may consider to determine if a valid employment relationship will exist or continue to exist include, but are not limited to:
(i) Whether the petitioner supervises the beneficiary and, if so, where such supervision takes place;
(ii) Where the supervision is not at the petitioner’s worksite, how the petitioner maintains such supervision;
(iii) Whether the petitioner has the right to control the work of the beneficiary on a day-today basis and to assign projects;
(iv) Whether the petitioner provides the tools or instrumentalities needed for the beneficiary to perform the duties of employment;
(v) Whether the petitioner hires, pays, and has the ability to fire the beneficiary;
(vi) Whether the petitioner evaluates the work-product of the beneficiary;
(vii) Whether the petitioner claims the beneficiary as an employee for tax purposes;
(viii) Whether the petitioner provides the beneficiary any type of employee benefits;
(ix) Whether the beneficiary uses proprietary information of the petitioner in order to perform the duties of employment;
(x) Whether the beneficiary produces an end-product that is directly linked to the petitioner’s line of business; and
(xi) Whether the petitioner has the ability to control the manner and means in which the work product of the beneficiary is accomplished.
(2) In cases where the H-1B beneficiary possesses an ownership interest in the petitioning organization or entity, additional factors that USCIS may consider to determine if a valid employment relationship will exist or continue to exist include, but are not limited to:
(i) Whether the petitioning entity can hire or fire the beneficiary or set the rules and parameters of the beneficiary’s work;
(ii) Whether and, if so, to what extent the petitioner supervises the beneficiary’s work;
(iii) Whether the beneficiary reports to someone higher in the petitioning entity;
(iv) Whether and, if so, to what extent the beneficiary is able to influence the petitioning entity;
(v) Whether the parties intended that the beneficiary be an employee, as expressed in written agreements or contracts; and
(vi) Whether the beneficiary shares in the profits, losses, and liabilities of the organization or entity.
As with all of the rules that are being published and pushed out during the last days of this current administration, we will need to continue to monitor and see how the incoming Biden-Harris Administration will be handling these rules. It is our understanding that an announcement will be made by the new administration shortly after the inauguration that many of these new rules may be on hold before implementation. Stay tuned!
The above has been provided for educational information only.