On May 20, U.S. Citizenship & Immigration Services (USCIS) entered into an agreement with the information technology trade group ITServe Alliance Inc. to overturn more than 200 H-1B denials. The move comes after a federal court ruled in March that USCIS policies narrowly defining employer-employee relationships, as well as other regulatory requirements for H-1B classification, were implemented outside of proper notice and comment rulemaking. The agreement provides further evidence that litigation is now a critical tool for combating restrictive USCIS policies and adjudications.

In recent years, USCIS has increasingly challenged employers seeking H-1B classification for highly skilled workers in specialty occupation positions, i.e,. jobs that normally require at least a bachelor's degree in a related field. The H-1B petition must be supported by a labor condition application (LCA) in which the employer confirms the wages and working conditions of the H-1B worker will not adversely affect U.S. workers. The H-1B visa is widely relied upon by companies in a variety of critical industries, including employers of technology, pharmaceutical, health care and university professionals. Although USCIS has increasingly scrutinized many facets of the H-1B program, a major area of focus has been on consulting firms that place H-1B workers at third-party worksites.

The question of what constitutes a sufficient employer-employee relationship for H-1B purposes is governed by regulation, which defines a "United States employer," in part, as one that has an employer-employee relationship with its employees "as indicated by the fact that it may hire, pay, fire, supervise or otherwise control the work of any such employee."

Heightened scrutiny of third-party placements under the H-1B program began in January 2010 with the issuance of the "Neufeld memo" by USCIS, which provided that an H-1B petitioning employer must establish the right to control when, where and how a beneficiary employee performs a job based on the totality of the circumstances. Included in this assessment was the employer's ability to "hire, fire and supervise" the employee as well as responsibility for the overall direction of the work completed. To illustrate, the Neufeld memo provided examples of qualifying and nonqualifying employment arrangements, the latter of which included IT consulting companies that were mere staff augmentation providers. The Neufeld memo further provided that where H-1B work is to be performed at more than one worksite, a petitioning employer must provide a complete itinerary of services to be performed for the duration of the H-1B.

More recently, in February 2018, USCIS issued a stricter policy memo titled "Contracts and Itineraries Requirements for H-1B Petitions Involving Third-Party Worksites," providing further guidance on valid employer-employee relationships at third-party worksites. In such a case, USCIS indicated that a petitioning employer must establish through contracts or similar evidence, such as work orders or end-client letters, that it has "specific and nonspeculative qualifying assignments" for the entire duration requested on the H-1B petition. More specifically, the memo required a petitioner to show that it had a specific work assignment in place for the beneficiary; the petition was properly supported by an LCA that corresponded to such work; and the actual work to be performed was in a specialty occupation based on the work requirements imposed by the end-client who uses the beneficiary's services.

The February 2018 memo further required that H-1B petitions for employment at one or more third-party worksites be accompanied by an itinerary providing at least the dates and locations for the services to be provided. Importantly, the memo also indicated that USCIS would exercise discretion to limit H-1B approvals to the amount of time for which evidence of nonspeculative employment was provided and would look to these same factors, and compliance therewith during the prior approval period, when considering extensions.

The overall effect of the February 2018 memo and the Neufeld memo, considered with other USCIS policies restricting the H-1B program, has been a sharp increase in H-1B denials in recent years as well as an increase in approvals of extremely limited duration, including approvals limited to just one day. With this increase in denials has come an increase in litigation.

ITServe Alliance successfully challenged H-1B denials under the foregoing policy memos, with the U.S. Court of Appeals for the D.C. Circuit ruling in ITServe Alliance v. U.S. Citizenship & Immigration Services (USCIS), No. 1:18-cv-02350-RMC (D.C. Cir. Mar 10, 2020) that USCIS's interpretation of the employer-employee relationship requirement was "inconsistent with its regulation, was announced and applied without rulemaking, and cannot be enforced." The court held that USCIS's overly strict definition of the employer-employee relationship ignored regulatory language that permits different indicia of control, such as the ability to hire, to fire, or to supervise, to be sufficient for this purpose. The court further ruled that USCIS's requirement that petitioning employers provide contracts or other evidence of nonspeculative work for the duration of the visa request was not supported by statute, that the itinerary requirement was superseded by a later statute that permits employers to place H-1B workers in non-productive status, and that the agency must provide reasoning when granting H-1B status for less than the requested period.

Under the resulting May 20 agreement, USCIS will rescind the February 2018 policy memo and reopen H-1B denials that were the subject of the ITServe Alliance lawsuit. This relief, however, is limited to cases in pending litigation and other employers must separately bring suit to overturn similar denials. USCIS did not admit any wrongdoing as part of the agreement and is not precluded from seeking to accomplish the desired changes to the H-1B program through proper notice and comment rulemaking. While USCIS has indicated that such rulemaking is forthcoming, considering the agency's budgetary woes and pandemic-related service disruptions, it remains to be seen whether a proposed rule will be issued.

USCIS's agreement with ITServe Alliance is just one example of litigation leading to beneficial outcomes in H-1B adjudications. Separately, USCIS recently reversed denials of H-1B petitions for market research analysts following the filing of a class action lawsuit, and federal courts have recently handed USCIS losses in several cases related to H-1B adjudications, with notable examples including 3Q Digital v. USCIS and Taylor Made Software v. Cuccinelli.

Together, these developments affirm that litigation is a critical tool in challenging restrictive USCIS policies.

Allie K. Dempsey is a senior associate in Klasko Immigration Law Partners' Philadelphia office. She is responsible for providing strategic and comprehensive business immigration solutions to the firm's corporate clients as well as for working with individuals of extraordinary ability to achieve their immigration goals.