In its waning hours, the Trump Administration announced comprehensive, burdensome changes to H-1B visa requirements for multiple firms across virtually all industries. Fortunately, however, the changes are set to detonate on a long fuse, i.e., by July 14, 2021, unless the Biden Administration, Congress or the Courts sooner intervene. The effects of these changes will be felt by every company that allows H-1B workers to perform services in specialty occupations at its worksite through a contractor, staffing company, or professional employer organization (PEO).

Presently, the obligation of compliance with H-1B requirements affecting required wages, working conditions, benefits and other labor protections under the Immigration and Nationality Act (INA) is imposed solely on the entity directly employing and paying the noncitizen worker and submitting an H-1B visa petition with U.S. Citizenship and Immigration Services (USCIS).

After July 14, 2021, however, unless this time bomb is sooner deactivated, both the corporate customer (or end client) and the contracting firm will each be required to file (1) a separate Labor Condition Application (LCA) with the U.S. Department of Labor (DOL), according to two DOL issued guidance documents released last week from the Office of Foreign Labor Certification and the Wage and Hour Division (WHD), and (2) a separate petition with USCIS to procure the specialty occupation services for the same H-1B worker. Each entity will also be separately required to persuade USCIS that it maintains an employer-employee relationship with the H-1B worker under a scaled-back “Strengthening the H-1B” final rule. (The earlier version of that rule, which has been enjoined by a federal court, would have also made it far more difficult for the worker to qualify as employable in a specialty occupation by limiting the number of fields of study or degree majors that USCIS would recognize and accept.)

The new H-1B “Strengthening” rule would do anything but bolster the program. It establishes an 11-factor test for determining whether the particular petitioning firm has an employer-employee relationship with the prospective H-1B worker, and adds another five factors for agency consideration if the H-1B beneficiary possesses an ownership interest in the petitioning organization or entity – a virtual death knell for many startups that employ noncitizen owners.

These changes reflect the haste with which they were issued. They introduce an extensive immigration-compliance layer to be negotiated on top of every service-provider, staffing and PEO contract intended to deploy H-1B workers to a worksite controlled by one of the contracting parties. It would also impose new contract-administration, data-sharing, and wage-payment and benefits-coordination requirements. These steps would be necessary to make sure that both of the contracting parties fulfill their independent duty to employ only workers whom the employer knows, or should know, are authorized for employment in the United States as required by INA § 274A.

The changes raise a bundle of unanswered questions and dilemmas:

  • Must USCIS approve both petitions as a precondition to the H-1B worker’s placement at the end-client’s worksite? Presumably, the answer would need to be “yes.” If the agency approved one but not the other petition, conceivably it would need to delineate with some degree of particularity the extent and nature of employment authorization for the particular H-1B worker at the job site. The Strengthening rule does not specify.
  • How will both employers (the service provider and the end client) track tax payments made by the other in order to establish total “cash wages paid” under the DOL’s regulation which looks to wages reported as income on payroll returns. For that matter, how would one of the two petitioning employers know what the other paid and what benefits were provided so that the H-1B worker is not doubly rewarded in pay and benefits?
  • How would U.S. Immigration and Customs Enforcement (ICE) and the Justice Department’s Immigrant and Employee Rights (IER) section sort out compliance obligations and penalties when there are two petitioning employers interfacing with a single H-1B worker?
  • If one of the two H-1B petitioning entities violates the visa’s requirements, does that deprive the other of the worker’s services, and, does it render the H-1B worker out of nonimmigrant status and ineligible to adjust status to lawful permanent residency? In an era of individual responsibility, the answer should be “no;” but the H-1B Strengthening rule doesn’t say.
  • What new burdens will these changes place on petitioning “employers” under state law and federal laws aside from immigration?

Nothing in the DOL and DHS announcements suggests that these questions were considered in the rush to publication. Preventing the DOL changes from becoming effective is an easy matter for the incoming Biden Administration, which could merely rescind them. The DHS rule, however, may require Congressional action under the Congressional Review Act, or litigation, or promulgation of a superseding regulation. Litigation, in particular, seems likely to prevail given that the DHS rule upsets settled reliance interests, and offers no persuasive basis to say that these eleventh-hour changes were considered with due deliberation. Fortunately, there is sufficient time to suspend or otherwise put the kibosh on these changes.