bigstock-Passports-31148August 16, 2010

This is one of three blog series which will provide an insight into a lawsuit which was filed in the District of Columbia Federal court challenging the new H-1B Neufeld Memo which had an impact on H-1b applications in the US including Columbus, Ohio and Troy Michigan. On January 8, 2010 the United States Citizenship and Immigration Services (USCIS) issued a memorandum known as the Neufeld Memo which sets a new standard in determining employer-employee relationship when adjudicating newly filed H-1B petitions.

In the complaint, the plaintiffs argue that change in policy amounts to a change in the law without congressional mandate or following proper rulemaking procedure and has had an immediate and harmful effect on the small businesses in the United States that hire foreign professionals on H-1B visa. The plaintiffs comprise of five companies have decided to challenge the memorandum in a federal district court. The companies include three software development firms and two not-for-profit trade associations (Plaintiffs). The lawsuit was filed in June 8, 2010.

In the complaint, Plaintiffs explained that for nearly half a decade, staffing companies and small businesses in the United States have been hiring temporary and long-term employees for specialty positions on H-1B visas. Before granting a visa, the USCIS assesses whether or not there is an employer-employee relationship. An employer must have the ability to hire, fire, pay, and supervise the H-1B employee. In many instances the employment situation regarding these visas does tend to be different because the process normally involves three parties.

There is the business seeking the skills of the employee, the foreign professional seeking employment, and a staffing firm that is also involved in the process as the actual employer of the H-1B foreign national. Due to the nature of these working relations, the employees are often hired as employees to the staffing company and is being contracted out to provide services often in the area of Information Technology. This specific multi party relationship created the loophole that triggered USCIS improper change in the law.

The Plaintiffs explained to the court that when the USCIS memorandum went into effect, it changed the factors outlined in the Code of Federal Regulations that are used to assess whether or not an H-1B visa petition will be approved or renewed. The USCIS memorandum states that the small businesses such are the plaintiffs are no longer classified as real employers because they do not maintain an employer-employee relationship under USCIS revised mandate. Further they claimed the USCIS added language to the original law that gave it a different meaning and as such expanded their ability to use their own discretion when granting or rejecting petitions for H-1B visas. The USCIS memo maintains that when employees exercise independence they may not meet the requirements for obtaining or renewing their H-1B visa.

Plaintiffs presented numerous arguments on behalf of small businesses. First, they argued that the associate director of the USCIS did not have the authority to issue the changes. The memorandum directly impacts an existing legislative rule. Adjustments to laws of this nature can only be issued by the Secretary for Homeland Security. Second, the memorandum was enacted in violation of the Administrative Procedure Act’s notice and comment requirements. According to these terms, the proposed rule changes should have been published in the Federal Register. Once changes are posted in the Register, the general public can access the information and leave comments. Third, the USCIS failed to perform a Regulatory Flexibility Act analysis. The RFA was created to analyze the federal regulations and balance changes according to the needs and abilities of the small business sector.

Federal agencies are required to look at the impact that their actions will have on small businesses before any official changes are made. In past cases, when agencies have not complied with the RFA, courts have suspended regulations. Finally, the memorandum specifically focused on the use of the term “contractor” or “independent worker” when the USCIS analyzed the validity of the employer-employee relationship. However, the USCIS’s use of the word “contractor” conflicts with the straightforward classification of the term in the Immigration and Nationality Act (INA). The INA specifically accounts for the classification of qualified temporary workers who come to the United States to perform services for sponsoring employers in specialty occupations.

In conclusion, the Plaintiffs argue in the complaint that the changes USCIS made to existing laws are invalid due to numerous oversights and mistakes. The small businesses are requesting that the court issue an injunction in response to the actions of the USCIS and the negative impacts that have greatly harmed the small business sector.