On February 22, 2018, U.S. Citizenship and Immigration Services (USCIS) released a controversial memo designed to make it difficult (some say “impossible”) for professionals in H-1B status to provide services at the site of their employer’s customers. The USCIS “third-party placement” memo is one of a series of moves by the Trump administration to restrict the use of H-1B visas and, not surprisingly, it has resulted in litigation.
On May 1, 2018, Jonathan Wasden, an immigration attorney, filed the case of Small and Medium Enterprise Consortium (SMEC) v. DHS in the U.S. District Court, District of New Jersey. Wasden was a trial attorney in the Office of Immigration Litigation at the U.S. Department of Justice and an attorney in the USCIS Administrative Appeals Office (AAO).
Today, all major U.S. companies contract out for services in order to focus on their core line of business. Both the companies and their contractors are engaging in something economists consider beneficial to a well-functioning market economy – specialization. The limited availability of workers with certain technical skills has made such contracts even more important today.
The USCIS policy memo is seen by some as an attempt by the federal government (or at least some government officials) to tell companies how to organize their businesses and to specify which employees may provide services at customer sites. “Companies in the information technology (IT) services, management consulting, healthcare, and staffing fields are going to feel this change most acutely as it requires increased documentation to gain approval of an H-1B petition if the visa holder will work at a customer site,” Vic Goel, managing partner, Goel & Anderson, told me in an interview in March 2018. “In such cases, USCIS has indicated it will require employers to provide detailed documents proving their clients have confirmed an H-1B worker’s job duties, the degree requirement for that job, and how long the job will last.”
Goel noted the apparent intention of USCIS is to have a “chilling effect” on the relationship between companies and their clients. “Few clients will be comfortable weighing in on what an individual employee of a contractor will be working on and whether his or her job requires a specific degree. While it’s clear that USCIS intended to take aim at IT outsourcing firms with this change, its implications will be felt in other industries, and by investors and consumers in the long run.”
If the policy holds, one likely result will be a greater emphasis on shifting work outside the United States to overcome what employers and their customers perceive as U.S. government micromanaging of legitimate contractual relationships between companies.
Jonathan Wasden said a major part of the lawsuit rests on how Congress split authority over the H-1B visa category between the Department of Labor (DOL) and USCIS. He notes that each agency has well-defined roles but because of the USCIS third-party placement memo the two agencies now disagree about who is eligible to file for an H-1B petition. “Distilled to its essence,” he said, “this case presents the court with these questions: 1) Did Congress intend for the Department of Labor and USCIS to have diametrically opposed definitions of the same terms in the H-1B process? And 2) If not, which of these two agencies did Congress intend to delegate definitive authority to?”
While most cases in federal court can be viewed by anyone, immigration cases are often locked down in PACER (Public Access to Court Electronic Records). “There tends to be a lot of personally identifiable information in these cases which makes litigants vulnerable to ID theft,” explains Wasden. “While normally attorneys would redact this information out, in an immigration case these facts are legally significant. For that reason, the only people who can view the documents are parties.”
Since information on the filings in this case are not likely to be public, this interview with Jonathan Wasden presents a unique opportunity to learn about the lawsuit.
Stuart Anderson: What is the goal of the lawsuit?
Jonathan Wasden: The lawsuit is seeking clarification on where one federal agency’s jurisdiction stops, and another begins. Right now, you have two agencies involved in H-1B petitions, and they have contradictory rules for who can file, and how key aspects of the program are implemented. Simply put, you can’t comply with both agencies’ rules.
The case is asking the court to resolve this bureaucratic Catch-22. This is not the first time Congress has created a statute where federal agencies shared jurisdiction. There are well established rules for determining which of these agencies has authority to define the key terms and processes in the H-1B visa. We are asking the court to apply those rules and enforce the rule of law.
Anderson: There are a number of legal arguments you are making in the lawsuit. Can you explain the issue of how an “employer” is defined?
Wasden: It depends on which agency’s definition you are asking about. Under the statute, the first step in the H-1B process is to get a Labor Condition Application (LCA) from the Department of Labor. This requires the “employer” to state the precise nature of the position, the prevailing wage in the area of employment, and working conditions. The employer signs the LCA and agrees to DOL’s jurisdiction and enforcement. Congress has given DOL very broad enforcement powers to penalize employers who break the rules.
So, according to DOL, the “employer” is the entity who submits the LCA, signs it, and agrees to submit to jurisdiction of DOL. DOL regulations explicitly allow employers to place employees at third-party worksites, and while the employees are there DOL allows both the “employer” and the worksite to share aspects of control.
According to USCIS, as the lawsuit characterizes the situation, an employer cannot place an employee at a third-party worksite unless they have exclusive right to control every aspect of the employee’s day-to-day work, and the employee must contribute to the employer’s line of business. In practice, what this means is an employer who places nurses, physical therapists, or IT professionals in a third-party worksite to provide care or build an IT system can satisfy DOL’s definition but cannot meet USCIS’s definition.
Anderson: Is another issue USCIS’s requirement of an exact itinerary?
Wasden: Yes, the suit also challenges the “itinerary rule.” Keep in mind that Congress authorized the H-1B visa for three-year stays in the U.S.
There are a couple of problems here: a legal and a practical one. First, the legal issue is that INS (the Immigration and Naturalization Service, a USCIS predecessor) acknowledged that this rule was unlawful. In 1998, INS published a notice in the Federal Register that the rule was created under a prior statute and had no statutory authority under current law. That by itself is enough to invalidate the rule. Unfortunately, INS failed to conclude the revocation process. But INS notice to rescind is still in the Federal Register, along with its admission that the rule is not valid under existing law.
The practical problem is that the H-1B visa is a “lottery.” You have 65,000 visas available annually, plus a 20,000-exemption, and roughly 190,000 applications. So, the government selects cases. At the time you file your petition you do not know if it will be selected in the lottery. So, imagine if you are a physical therapist staffing company, how are you going to provide an itinerary for an employee you don’t know if you can hire? It also makes it impossible for a business to be flexible, compete for new business, or seek to expand.
Anderson: What other legal arguments are you making in the lawsuit?
Wasden: The suit is asking the court to require USCIS to follow the legal process for making regulations and rules. Congress created the Administrative Procedure Act (APA) to prevent random and erratic government action. The issues we are challenging were created without going through APA’s requirements. If the agency had followed the law when making regulations we would not be in this mess right now.
Anderson: Have there been similar cases in the past and how were they decided?
Wasden: There has not been anything exactly on point filed. The H-1B visa [changing the H-1 category] was created in 1990, and the process (filing an LCA with DOL and then filing a visa with USCIS) was loosely modeled off of a visa category under the prior law (dealing with employment-based immigrant visas).
Back in the 1980s, several cases challenged INS’s rules that conflicted with DOL rules under that prior visa category. In each case, INS lost.
Anderson: How would you respond to those who argue the USCIS policy on third-party placement is necessary?
Wasden: I would ask them “necessary for what?” Under the INA [Immigration and Nationality Act] the Department of Labor has the ability to protect U.S. workers and wages. USCIS has a much narrower mandate to determine if a position is a “specialty occupation.” A third-party worksite has no impact on whether a position is a “specialty occupation.”
DOL has no problems with placing employees at third-party worksites and stated explicitly that it does not negatively affect DOL’s ability to enforce the law.
Anderson: How does deference to regulatory agencies contained in the Chevron U.S.A., Inc. v. Natural Resources Defense Council, Inc. decision affect the lawsuit?
Wasden: This case is admittedly different from the normal challenge to a government rule. Here, we are arguing about which agency’s rules are valid.
Actually, Chevron and the body of law discussing deference is on the plaintiffs’ side.
Anderson: Is there an easy way for USCIS to solve the problems you raise in the lawsuit?
Wasden: It’s the nature of bureaucracies to grow and expand power. That’s just what they do. In that regard USCIS is not unique. What they are doing now is growing beyond what the statute allows.
The easy fix here is for them to stay within the bounds created by Congress and let DOL do its job. Congress gives DOL funds each year to investigate, pursue, and resolve violations. USCIS is making a power grab.
Anderson: Do you think the goal of USCIS is to prevent H-1B visa holders from performing work at a customer/client site whether or not the statute allows the agency to accomplish that goal?
Wasden: That seems to be the effect of the rule. The rules only apply to companies who place employees off-site. The rules require evidence that is often impossible to provide. USCIS then denies applications for failure to comply with its impossible rules.
