ITServe is a prominent association of IT service organizations in the United States. Since 2018, ITServe filed litigation to oppose USCIS in their erratic decisions, and on March 10, 2020, ITServe had a big win in court against USCIS. This article discusses what led up to the decision and what it means to H-1B employers.
The court made four key decisions:
1) USCIS’s interpretation of employer-employee relationship in H1B petitions is illegal and unenforceable.
2) USCIS’s requirement that an H-1B employer placing a worker on a client project must provide proof of end client work assignments for the entire duration of requested H1B status is unenforceable. The requirement to prove “non-speculative work assignments for the duration period requested is unsupported by statute/regulation and arbitrary and capricious.”
3) USCIS’s requirement of an itinerary of services is no longer enforceable because a later statute states that an employer may place H-1B workers on paid, non-productive status.
4) USCIS can’t cut short an approval period requested by the H-1B employer without an explanation of its rationale. Short term approvals are now invalid.
As a result of the decision, about two months later, on May 20, 2020, USCIS has agreed to a settlement with ITServe to overturn of 10 years of progressively adverse policies USCIS imposed against H-1B employers.
It is important to expand on 1) the backstory of the adverse policies, and 2) what are the implications of this favorable decision against these policies.
1) USCIS’s interpretation of employer-employee relationship in H1B petitions is illegal and unenforceable.
2) USCIS’s requirement that an H-1B employer placing a worker on a client project must provide proof of end client work assignments for the entire duration of requested H1B status is unenforceable. The requirement to prove “non-speculative work assignments for the duration period requested is unsupported by statute/regulation and arbitrary and capricious.”
3) USCIS’s requirement of an itinerary of services is no longer enforceable because a later statute states that an employer may place H-1B workers on paid, non-productive status.
4) USCIS can’t cut short an approval period requested by the H-1B employer without an explanation of its rationale. Short term approvals are now invalid.
As a result of the decision, about two months later, on May 20, 2020, USCIS has agreed to a settlement with ITServe to overturn of 10 years of progressively adverse policies USCIS imposed against H-1B employers.
It is important to expand on 1) the backstory of the adverse policies, and 2) what are the implications of this favorable decision against these policies.
I. BACKSTORY
H1B petitions are work visa petitions filed by employers seeking to employee workers in a specialty occupation, meaning, in a job for which a bachelor’s degree is a normal requirement. This category is highly popular with IT consulting companies which contract their employees to be placed at end client companies on their projects. All the while, these workers remain the employee of the consulting company, which would be responsible for paying the worker’s W-2 salary and benefits.
H1B petitions are work visa petitions filed by employers seeking to employee workers in a specialty occupation, meaning, in a job for which a bachelor’s degree is a normal requirement. This category is highly popular with IT consulting companies which contract their employees to be placed at end client companies on their projects. All the while, these workers remain the employee of the consulting company, which would be responsible for paying the worker’s W-2 salary and benefits.
i) THE NEUFELD 2010, RIGHT TO CONTROL MEMO: WHERE IT ALL STARTED
The documentary requirements were made complicated by a January 8, 2010 Neufeld Memo. The memo stated that in order to prove an “employer-employee relationship” necessary in H1B petitions, as per common law stated by the US Supreme Court in “Nationwide Mutual Ins. Co. v. Darden, 503 US 318 (1992),” a variety of factors were listed, but USCIS highlighted the factor of a “right to control the manner and means” by which the worker performs tasks. In practice, USCIS started to not only demand that the H-1B employer show they retain the “right,” but USCIS arbitrarily would demand that they prove that they would actually “actively exercise the right” by showing evidence of how the employer would exert control while the worker was placed on a client project. The memo dismissed that a pure placement without extensive reporting and exercise of control amounts to a lack or a right to control, therefore, a lack of an employer-employee relationship, and must be denied. Failure to prove otherwise also would warrant denial.
The documentary requirements were made complicated by a January 8, 2010 Neufeld Memo. The memo stated that in order to prove an “employer-employee relationship” necessary in H1B petitions, as per common law stated by the US Supreme Court in “Nationwide Mutual Ins. Co. v. Darden, 503 US 318 (1992),” a variety of factors were listed, but USCIS highlighted the factor of a “right to control the manner and means” by which the worker performs tasks. In practice, USCIS started to not only demand that the H-1B employer show they retain the “right,” but USCIS arbitrarily would demand that they prove that they would actually “actively exercise the right” by showing evidence of how the employer would exert control while the worker was placed on a client project. The memo dismissed that a pure placement without extensive reporting and exercise of control amounts to a lack or a right to control, therefore, a lack of an employer-employee relationship, and must be denied. Failure to prove otherwise also would warrant denial.
ii) 2018 CONTRACTS AND ITINERARIES FOR 3RD PARTY PLACEMENTS MEMO
USCIS gradually would become more strict on the 2010 memo, and doubled down on it with the February 22, 2018 memo, under the pretense of “protecting Americans.” In this memo, USCIS formalized the requirement to provide contracts for the work assignment, and with the understanding that sometimes contracts may be unavailable, evidence of work assignments and evidence of the client’s legitimacy could be provided, such as letters from the client. In practice, however, USCIS took free reign to deny cases that fell short of providing all contracts, and exercised this new approach with impunity. Furthermore, it emphasized that the employer must prove that the client project will last for the entire duration (typically 3-years) requested. Otherwise, USCIS would only be obliged to approve the petition for the duration confirmed, typically going off of the date of the current purchase order (typically issued for a period of months rather than years).
USCIS gradually would become more strict on the 2010 memo, and doubled down on it with the February 22, 2018 memo, under the pretense of “protecting Americans.” In this memo, USCIS formalized the requirement to provide contracts for the work assignment, and with the understanding that sometimes contracts may be unavailable, evidence of work assignments and evidence of the client’s legitimacy could be provided, such as letters from the client. In practice, however, USCIS took free reign to deny cases that fell short of providing all contracts, and exercised this new approach with impunity. Furthermore, it emphasized that the employer must prove that the client project will last for the entire duration (typically 3-years) requested. Otherwise, USCIS would only be obliged to approve the petition for the duration confirmed, typically going off of the date of the current purchase order (typically issued for a period of months rather than years).
iii) 2019: THE UGLIEST YEAR FOR H1B OF ALL TIME
On August 8, 2019, Forbes Magazine released an article: “Latest USCIS Data Show Increase in Denials For New H-1B Visas,” which was truly an understatement.
On August 8, 2019, Forbes Magazine released an article: “Latest USCIS Data Show Increase in Denials For New H-1B Visas,” which was truly an understatement.
The article revealed that, according to USCIS released data, “denial rates for H-1B petitions have increased significantly, rising from 6% FY 2015 to 33% through the second quarter of FY 2019 for new H-1B petitions for initial employment”
The article provided a chart of some of the most leading H-1B sponsoring employers. Non-consulting technology companies like Facebook, Apple, Amazon, Microsoft, and Google had denial rates of 0-1% in FY2015, but increased to 5-13% for FY2019 to date. Meanwhile, consulting companies like Ernst & Young, Tech Mahindra, Cognizant and Wipro had denial rates of 0-8% in FY2018, but increased to an unprecedented 47-60%.
The nearly 6-fold increase in the overall denial rate was on account of USCIS having “systematically rewritten the rules on H-1B visas, without following the law, and destroyed any sense of predictability in the system.”
The article did not mention anything about shortened approvals, however. During 2019, to add insult to injury, short approvals were reported across the board by immigration attorneys in H-1B petitions, even as short in duration as a single day.
Through procedurally faulty USCIS policy changes, the Trump administration had effectively turned the process of getting H-1Bs into a bureaucratic nightmare leaving H-1B employers fearful and frustrated. However, that’s not the end of the story.
The article provided a chart of some of the most leading H-1B sponsoring employers. Non-consulting technology companies like Facebook, Apple, Amazon, Microsoft, and Google had denial rates of 0-1% in FY2015, but increased to 5-13% for FY2019 to date. Meanwhile, consulting companies like Ernst & Young, Tech Mahindra, Cognizant and Wipro had denial rates of 0-8% in FY2018, but increased to an unprecedented 47-60%.
The nearly 6-fold increase in the overall denial rate was on account of USCIS having “systematically rewritten the rules on H-1B visas, without following the law, and destroyed any sense of predictability in the system.”
The article did not mention anything about shortened approvals, however. During 2019, to add insult to injury, short approvals were reported across the board by immigration attorneys in H-1B petitions, even as short in duration as a single day.
Through procedurally faulty USCIS policy changes, the Trump administration had effectively turned the process of getting H-1Bs into a bureaucratic nightmare leaving H-1B employers fearful and frustrated. However, that’s not the end of the story.
iv) 2020: JUDGE COLLYER DROPS THE HAMMER ON USCIS
In the backdrop of the unprecedented assault USCIS waged on H-1B employers, the fight for justice was being fought in in the ITServe litigation which was initiated in the US District Court in DC on October 11, 2018.
In the backdrop of the unprecedented assault USCIS waged on H-1B employers, the fight for justice was being fought in in the ITServe litigation which was initiated in the US District Court in DC on October 11, 2018.
ITServe Alliance v. Cissna, No. 1:18-cv-02350 (D.C. March. 10, 2020). Read the decision here: https://nfap.com/wp-content/uploads/2020/03/ITServe-Order-DDC.pdf
As mentioned earlier, ITServe is an association of IT organization impacted by the unprecedented anti-H-1B policies introduced by USCIS over the recent years. The aim was to overrule these policies through litigation.
Much to the delight of H-1B employers, US District Judge Collyer rejected the Trump administration policies with a formal ruling in the ITServe litigation, invalidating years of adverse memos and policies from USCIS that caused the painful increase of denials and short approvals.
Judge Collyer stated, “The current USCIS interpretation of the employer-employee relationship requirement is inconsistent with its regulation, was announced and applied without rulemaking, and cannot be enforced.”
Judge Collyer stated, “The current USCIS interpretation of the employer-employee relationship requirement is inconsistent with its regulation, was announced and applied without rulemaking, and cannot be enforced.”
Based on this ruling, an employer can now hire, pay, fire, OR otherwise control the H-1B professional and the arrangement will be considered a valid employer-employee relationship. Again, the keyword is “OR” and not “AND,” meaning even if the worker is not controlled onsite, the petition should still be approvable.
In one decisive swoop, the judgment states that “the CIS 2018 policy memo is, therefore, invalid, as are the new CIS interpretations and requirements concerning itineraries. Accordingly, the Court also finds that CIS cannot enforce the CIS 2010 Guidance Memo against Plaintiffs.” The basis for this is that “an agency interpretation is substantively invalid when it conflicts with the text of the regulation the agency purported to interpret,” and “courts have refused to give deference to an agency’s interpretation of an unambiguous regulation, observing that to defer in such a case would allow the agency ‘to create de facto new regulation.” In other words, the judge said USCIS is only an agency and it is not in a position to play legislator to make up rules.
Another salient point brought up was the memo emphasizing the necessity to show control is contrary to regulation 8 CFR 214.2(h)(4)(ii), which says a US employer has the requisite relationship when it “may hire, pay, fire, supervise, OR otherwise control the work” of the employee. USCIS, in it’s faulty memo “silently replaced it (the word ‘or’) with an “and.” This sort of disingenuous sleight of hand renders the memo invalid.
Finally, in firm defense of the IT consulting sector, the decision states that it is “arbitrary and capricious” to require “contracts or other corroborated evidence of dates and locations of temporary work assignments for three future years; it is, in fact, a total contradiction of the Plaintiffs’ business model of providing temporary IT expertise to U.S. businesses.” The decision even approves of benching with pay due to factors such as a lack of work between projects, as the regulations also support this. In other words, no more insistence of purchase orders for a full three-year period. For IT consulting companies in particular, this is a major landmark ruling, because it will make the process of sponsoring and maintaining a worker on H-1B far more predictable, saving untiled millions of dollars on repeated filings.
II. THE AFTERMATH: CAN H-1B EMPLOYERS PARTY LIKE IT’S 2009?
Finally, on May 20, 2020, on the heels of the ITServe v. Cissna decision handed down by Judge Collyer, USCIS agreed to a settlement:
Finally, on May 20, 2020, on the heels of the ITServe v. Cissna decision handed down by Judge Collyer, USCIS agreed to a settlement:
In the now executed settlement USCIS agreed to:
1) rescind the 2018 Contract and Itinerary Memo requiring primary evidence of a specific work assignment within 90 days, 2) abstain from requiring itineraries in H1B petitions, and for the cases brought forth in the specific litigation for re-adjudication, USCIS will not 3) apply the 2010 right to control memo applying the common law test to show an employer-employee relationship requiring proof of controlling the worker on the project, nor 4) issue short approvals without explanation.
1) rescind the 2018 Contract and Itinerary Memo requiring primary evidence of a specific work assignment within 90 days, 2) abstain from requiring itineraries in H1B petitions, and for the cases brought forth in the specific litigation for re-adjudication, USCIS will not 3) apply the 2010 right to control memo applying the common law test to show an employer-employee relationship requiring proof of controlling the worker on the project, nor 4) issue short approvals without explanation.
So, in conclusion, the nightmare of short approvals and denials due to a lack of client contracts and absolute proof of project work for the full 3-year duration caused by the 2018 memo is over. The offending memo will be rescinded within 90 days. As for the 2010 right to control memo, employers should no longer have to prove control to show an employer-employee relationship, just a right to hire, pay and fire should be sufficient. We, at the American Visa Law Group, still suggest providing documentation to show that the candidate will have work from day one of the H-1B period requested, which means at least some form of corroborating evidence of availability of work.
Also, for cases where you currently have an RFE on these issues, respond as usual, but also cite this decision to argue against the RFE. At this time, USCIS officers might still be applying these rules because USCIS has 90 days to rescind, but if the case is cited, the officer should apply it when the adjudicate the case. The American Visa Law Group is already at work, developing a standard response.
This is truly a triumph of justice and a long awaited notch on the win column for H-1B employers yearning for a return to the halcyon days of adjudicative predictability.
This is truly a triumph of justice and a long awaited notch on the win column for H-1B employers yearning for a return to the halcyon days of adjudicative predictability.