USCIS Rescinds Policy Memos That Increased H-1B Visa Denials

U.S. Citizenship and Immigration Services (USCIS) has rescinded two policy memos responsible for most of the Trump administration’s increase in the denials of H-1B petitions. The recissions are to comply with a legal settlement reached following a business group’s recent victory in federal court over USCIS. The impact on companies will depend on further USCIS actions and a June 22, 2020, presidential proclamation that suspends the entry of new H-1B visa holders. (The article has been updated to reflect the proclamation. Read an analysis of the new proclamation.)

On May 20, 2020, USCIS agreed to a settlement with the business group ITServe Alliance that overturned 10 years of policies restricting employers and H-1B visa holders. The settlement followed a March 10, 2020, District Court opinion that repudiated key USCIS actions, along with a May 20, 2020, judge’s opinion in Georgia that also ruled against USCIS H-1B policies.

As part of the settlement, USCIS issued a new policy memo (on June 17, 2020) and agreed to withdraw a February 2018 memo on “Contracts and Itineraries Requirements for H-1B Petitions Involving Third-Party Worksites.” USCIS also rescinded the “Neufeld” memo, issued on January 8, 2010, in which USCIS used a potentially restrictive test to determine if an “employer-employee” relationship existed, including when H-1B visa holders performed work at a client’s location.

“The new policy memo appears to track the terms of the settlement agreement, and in one regard even goes further,” said Jonathan Wasden, a partner with Wasden Banias, who argued the plaintiff’s case for the ITServe Alliance. “In the settlement, the agency agrees to terms obliquely nullifying the Neufeld memo and its ‘common law agency’ test. In the new policy memo, the agency explicitly rescinds the entire memo. This is largely semantics, as the only purpose of the Neufeld memo was to create the common law test. But it is nice to have that clarity.”

What does the new policy memo mean for employers? It could mean lower H-1B denial rates and fewer Requests for Evidence. “Denial rates for new H-1B petitions for initial employment rose from 6% in FY 2015 to 30% in the first quarter of FY 2020,” according to a recent National Foundation for American Policy (NFAP) analysis. “As in earlier fiscal years, the highest denial rates are for companies that provide information technology or other business services to American companies.”

Before the settlement, as addressed in the March 10, 2020, opinion by U.S. District Judge Rosemary M. Collyer, employers faced several problems with USCIS policies, including the agency’s interpretation of an employer-employee relationship, an itinerary rule and short term approvals of H-1B petitions.

Employer-Employee Relationship: Before the March 10, 2020, opinion and May 20, 2020, settlement, USCIS claimed in the Neufeld memo it had the authority, in practice, to deny an H-1B petition unless an employer could hire, pay, fire, supervise, and otherwise control the work of any such employee. However, the use of “and” conflicted with the USCIS regulation and the Department of Labor’s definition of an employer, which used a more expansive and inclusive definition that included the word “or” instead of “and.”

The new June 17, 2020, policy memo tells USCIS adjudicators to follow the agency’s regulation: “The officer should apply the existing regulatory definition in assessing whether an employer and a beneficiary have an employer-employee relationship. The officer should consider whether the petitioner has established that it meets at least one of the ‘hire, pay, fire, supervise, or otherwise control the work of’ factors with respect to the beneficiary.” (Emphasis added.)

Requests for Evidence on Proof of Employment: “A bona fide job offer must exist at the time of filing,” according to the new policy memo. “The petitioner has the burden of proof to establish that employment exists at the time of filing and it will employ the beneficiary in the specialty occupation. If the petitioner’s attestations and supporting documentation meet this standard, then the officer should not request additional evidence and should approve the petition, provided all other eligibility requirements are met by a preponderance of the evidence.” (Emphasis added.)

Contracts: Before the March 20, 2020, opinion and later settlement, USCIS adjudicators might deny H-1B petitions unless employers could produce all contracts an H-1B professional would work on over a three-year period. Judge Collyer sided with the plaintiff. “The USCIS requirements that employers (1) provide proof of non-speculative work assignments (2) for the duration of the visa period is not supported by the statute or regulation and is arbitrary and capricious as applied to Plaintiffs’ visa petitions.”

The new USCIS policy memo states, “In support of the petition, an H-1B petitioner is not required by existing regulation to submit contracts or legal agreements between the petitioner and third parties.” However, it remains to be seen how USCIS adjudicators interpret their discretion to request contracts indicating future work. “An officer should deny a petition when the petitioner has not established that the beneficiary will work in a specialty occupation,” according to the new policy memo. “While a petitioner is not required to identify and document the beneficiary’s specific day-to-day assignments, the petitioner must meet all statutory and regulatory requirements, excluding the itinerary requirement under 8 CFR 214.2(h)(2)(i)(B).”

Limiting Validity Periods: During the May 9, 2019, court hearing, Judge Collyer cited the plaintiff’s example of USCIS granting one applicant an H-1B approval valid for only a single day – from February 1 to February 2, 2019. (See here.) USCIS justified such actions, in part, by citing the now-withdrawn February 2018 USCIS memo. The new policy memo conforms with the judge’s opinion: “USCIS may issue approvals for H-1B petitions with validity periods shorter than the time period requested by the H-1B petitioner,” states the new memo. “However, the decision must be accompanied by a brief explanation as to why the validity period has been limited.”

Anti-Benching: Judge Collyer’s opinion pointed to an “anti-benching” provision passed as part of the American Competitiveness and Workforce Improvement Act of 1998 that allows an employer to keep an H-1B employee during any “non-productive” periods as long as the employee is paid. Congress was addressing reports that an employer would petition for an H-1B visa holder and keep the professional “on the bench” and not pay them while waiting for additional work or contracts.

Under the Trump administration, USCIS claimed it was enforcing the anti-benching provisions of the law when it denied H-1B petitions if a petitioner could not prove an individual would work continuously by showing a series of contracts. One problem this raised is Congress gave the Department of Labor, not USCIS, the authority to investigate and enforce H-1B visas. Another problem, Judge Collyer ruled, is the law allows H-1B professionals to be “non-productive” for a time so long as employers pay them.

The June 17, 2020, policy memo may go too far when it states, “In assessing whether a beneficiary’s non-productive status constitutes a violation of the beneficiary’s H-1B nonimmigrant classification, the officer must assess the circumstances and time spent in non-productive status.”

“One area of concern that we will be monitoring is the anti-benching provisions,” said Jonathan Wasden in an interview. “The agency appears to be encroaching into the Department of Labor’s turf, and asserts it will now enforce benching standards. USCIS leaves open the possibility it may invalidate visas when a project ends, even if the employer continues to pay the LCA [labor condition application] wage.”

On anti-benching, Wasden views the legal basis for the USCIS policy to be dubious. “In the prior memo they justified this approach using the itinerary regulation, which was invalidated by the court,” said Wasden. “Here, they look to accomplish it with a new justification found in the regulation requiring amendments for material change. The obvious problem is that Judge Collyer’s decision, and the plain language of the statute, make clear that an employee can be ‘benched’ when there is no work to perform as long as they are given the required wage. If USCIS tries to enforce this, we will be back in court.”

Employers should view the legal settlement and rescission of the two USCIS memos as a check against over-reaching government actions. However, the good news on H-1B visas for employers may be short-lived. The Trump administration has issued a presidential proclamation that suspends the entry of H-1B visa holders, along with other anti-immigration measures. Employers will need to decide whether the glass is half-full or half-empty, or shattered on the ground.