bigstock-Citizenship-documents-43205116June 21, 2010

The United States Citizenship and Immigration Services (USCIS) has been continually threatened with lawsuits ever since the Neufeld Memorandum on Determining Employer-Employee Relationship for Adjudication of H-1B Petitions, Including Third-Party Site Placements was released. On June 8, 2010, precisely six months after the Neufeld Memorandum was released, the first lawsuit was filed against the USCIS, USCIS Director Alejandro Mayorkas, the Department of Homeland Security (DHS), and DHS Secretary Janet Napolitano. Several IT staffing companies and two staffing associations, namely Broadgate, Inc., Logic Planet, Inc., DVR Softek Inc., TechServ Alliance and American Staffing Association (Plaintiffs), have filed a five count complaint in U.S. District Court for the District of Columbia. In addition, the Plaintiffs have filed a motion seeking a preliminary injunction preventing the agency from enforcing the policies contained in the Neufeld H-1B Memorandum until their claims can be decided by the Court.

The basis for the lawsuit is no secret or surprise. Although IT consulting and other staffing companies have a well-established history of sponsoring and employing H-1B workers, the Neufeld H-1B Memorandum’s guidance makes it very difficult, if not impossible, for such companies to be H-1B visa sponsors. In fact, there have been reports that numerous IT consulting companies have closed due to the negative impact the Neufeld H-1B Memorandum has had on their ability to sponsor H-1B professionals. The supposed motivation behind the Neufeld H-1B Memorandum was to prevent staffing companies from sponsoring H-1B workers who were, in turn, hired out to other companies that were abusing or fraudulently using the workers. Unfortunately, the USCIS went so far in its efforts to prevent a small number of staffing companies from committing fraud that its guidance wrongfully prevents virtually all staffing companies from employing H-1B workers altogether.

In the complaint, Plaintiffs are alleging the USCIS has illegally changed the law regarding whether staffing companies have the requisite control over their employees to qualify as H-1B employers. Count one of the complaint claims the USCIS violated the Administrative Procedures Act (APA) by issuing a new rule without following the proper rule-making procedures and seeks to have the memorandum vacated. Count two of the complaint claims a violation of the Regulatory Flexibility Act for failing to analyze the new rule’s impact on small businesses. The third, fourth and fifth counts allege the USCIS has exceeded its statutory and regulatory authority, that the memorandum is arbitrary and capricious, and that the memorandum is not authorized by law.

Broadgate, Inc., Logic Planet, Inc., DVR Softek Inc., TechServ Alliance and American Staffing Association have finally done what many groups have been threatening to do since the Neufeld H-1B Memorandum was first issued on January 8, 2010. The immediate motion for a preliminary injunction, if granted, may give staffing and consulting companies some relief in the short term. In the long term, hopefully this challenge will not only be successful in reversing the Neufeld H-1B Memorandum’s ill-conceived guidance, but also make the USCIS think twice before hastily issuing new rules without following the proper rule-making procedures.