U.S. Citizenship and Immigration Services (USCIS) recently issued a memorandum containing guidance for the processing of H-1B petitions involving certain employer-employee relationships, including self-employment, third-party site placements and independent contractors. Specifically, the memo states that an H-1B employer must establish that it will maintain the "right to control" the "when, where, and how" a sponsored H-1B worker performs the job, thus raising concerns about the viability of previously acceptable employment arrangements. This memo follows months of increased scrutiny by USCIS of H-1B petitions filed by consulting companies and H-1B employers that are owned by the employee who is being sponsored.

The memo provides eleven factors to which adjudicators may review in determining whether the requisite "right to control" exists in each situation. H-1B petitioners must therefore be prepared to clearly document how they will continue to maintain the right to control the work of the sponsored employee throughout the duration of any third-party site placement. Proof that independent contractors remain under the ultimate control of the H-1B petitioner would similarly be required in those situations. However, when it comes to self-employed H-1B workers, the USCIS memo is contradictory. The memo recognizes that a corporation is a separate legal entity apart from its owners and even its sole owner, but then goes on to find that "an H-1B beneficiary/employee who owns a majority of the sponsoring entity and reports to no one but him or herself may not be able to establish that a valid employment relationship exists in that the beneficiary, who is also the petitioner, cannot establish the requisite 'control'."

Companies that rely on professional services provided by consulting firms also have a strong interest in ensuring that their staffing needs can continue to be met where H-1B workers are being assigned to their work sites. Such companies may be asked to modify contracts and other documents to ensure that the consulting firm clearly retains the right to control the activities of the assigned workers.

Further guidance from USCIS or the courts may be needed to provide clear rules upon which H-1B petitioners with non-traditional employment arrangements may successfully sponsor otherwise qualified foreign nationals. Hunton & Williams will continue to provide updates as new information is available. In the meantime, affected H-1B petitioners should consult with their immigration attorneys to ensure that the required contracts and other agreements are in place to comply with the requirements discussed above.