Tag Archive for: Employer-Employee Relationship

Cora-Ann Pestaina

Court Shoots Down Embarrassing Leaps by USCIS to Justify an H-1B Denial

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Ever got that frustrating feeling that the USCIS adjudicator first decided that the H-1B petition needed to be denied and only then set about finding reasons, however shaky, to support that denial?  Ever wondered how it is possible for the adjudicator to completely ignore the preponderance of the evidence standard in favor of the criminal standard of beyond all reasonable doubt? The case of Innova Solutions, Inc. v. Kathy A. Baran, case number 2:18-cv-09732 in the US District Court for the Central District of California evokes these exact types of feelings and questions.

As background, except where a different standard is specified by law, a petitioner or applicant in administrative immigration proceedings must prove by a preponderance of evidence that he or she is eligible for the benefit sought. See e.g. Matter of Martinez, 21 I&N Dec. 1035, 1036 (BIA 1997) (noting that the petitioner must prove eligibility by a preponderance of evidence in visa petition proceedings) . . .

The “preponderance of the evidence” standard requires that the evidence demonstrate that the applicant’s claim is “probably true,” where the determination of “truth” is made based on the factual circumstances of each individual case. Matter of E-M-, 20 I&N Dec. 77, 79-80 (Comm. 1989). In evaluating the evidence, Matter of E-M- also stated that “[t]ruth is to be determined not by the quantity of evidence alone but by its quality.” Id. Thus, in adjudicating the application pursuant to the preponderance of the evidence standard, the director must examine each piece of evidence for relevance, probative value, and credibility, both individually and within the context of the totality of the evidence, to determine whether the fact to be proven is probably true. Even if the director has some doubt as to the truth, if the petitioner submits relevant, probative, and credible evidence that leads the director to believe that the claim is “probably true” or “more likely than not,” the applicant or petitioner has satisfied the standard of proof.  See U.S. v. Cardozo-Fonseca, 480 U.S. 421 (1987) (defining “more likely than not” as a greater than 50 percent probability of something occurring).

Matter of Chawathe, A74 254 994 (Admin. Appeals Ofc. / USCIS Adopted Decision, Jan. 11, 2006).

Under the preponderance of the evidence standard, the adjudicating USCIS officer is supposed to approve the petition as long as it is “more likely than not” that the petitioner’s claim is true. Cases like Innova demonstrate that this standard is surely not being applied, at least not across the board.

Innova sought to employ the foreign national beneficiary as a Solutions Architect to work in-house at their corporate headquarters developing their proprietary software and hardware. USCIS issued what has become a typical RFE requesting additional information to establish the specialty occupation nature of the position; the beneficiary’s qualifications; and that an employer-employee relationship existed.  Innova’s RFE response included a cover letter explaining the type of the work in which the beneficiary would be engaged; a description of the beneficiary’s typical day by percentage; an organizational chart; a Proof of Concept for the project the beneficiary would be involved with; Innova’s tax returns; Innova’s lease for the area where the Beneficiary would work; and an overview of Innova. Still, USCIS denied the petition on the grounds that the employer-employee relationship had not been established and Innova had failed to demonstrate that the beneficiary would be working in-house and not placed with an end-client and failed to show sufficient in-house employment for the duration of the requested H-1B period.

Innova filed suit thereby allowing us to see that no argument is too weak for USCIS to rely upon.

Despite Innova’s clear statements in its initial petition and RFE response, USCIS argued that it was rendered incapable of determining whether the beneficiary would be working on Innova’s product or whether he would be working at a third party client site all because Innova’s website indicated that Innova’s main function is to provide information technology consulting services to other companies. But the court pointed out that this same website indicated that Innova provided “services” and “solutions” to its clients. Under the “solutions” portion of the website was information about software programs and applications created by Innova. The court stated that “because USCIS visited Innova’s website and relied on the website as evidence in making its findings, USCIS may not then ignore evidence on the website contradicting its position.”

Another reason for USCIS’ denial was that Innova failed to provide sufficient evidence to establish that it created its own products in-house. To justify its reasoning, USCIS pointed out that the Proof of Concept PowerPoint that Innova submitted with its RFE response merely established that the product exists and not that Innova is the company producing it or that the beneficiary would work on it. USCIS dismissed information on the project because all information about it “was submitted by petitioner or petitioner’s counsel in counsel’s cover letter”, i.e. there was no published or printed information. USCIS even went as far as to claim that despite Innova’s submission of a copy of its lease for a 450ft space, it remained unknown whether this is sufficient space to produce the information technology project or whether the space is being used to develop and produce the claimed product. USCIS also claimed that Innova’s tax returns were not sufficient to establish that the company produced a product that it sold within those tax years.

Thank goodness for the existence of rational judges. The court held that it was illogical for USCIS to dismiss Innova’s PowerPoint in its entirety just because there was an absence of printed work published about the product. The product is nonexistent and Innova consistently stated that the beneficiary was needed to produce the product. Regarding USCIS’ purported lack of knowledge as to whether the corporate headquarters would be able accommodate the work on the project, the court pointed out that it was entirely clear that the beneficiary would only require a desk and a computer! And, as for the tax returns, the court reminded USCIS that these were only submitted to prove that the company had sufficient work available for the beneficiary and not to prove it sold goods. Further, the product on which the beneficiary would work was intended to be used in-house to provide solutions to Innova’s clients and there was no stated intention to sell it.

Overall, USCIS claimed that it had to deny the case due to “numerous inaccuracies and contradictions.” Thankfully, the court did not find these to be plausible. The court shot down USCIS’ claim that there was an inaccuracy in Innova’s statement that it had 177 employees because the organizational chart it submitted showed only 7 people. The court pointed out that Innova never claimed that the chart listed every single employee. It was actually submitted to show that the beneficiary would report to the Vice President of the company.  USCIS also isolated one job duty that indicated the beneficiary would “clarify the ambiguities and issues with the business stakeholders and help the team in proper execution of the project” and used this to state that it appeared he may be working with clients. The court found that there was no evidence that he would not be doing this in-house as the company stated.

And, in its biggest leap, USCIS took Innova old job advertisements, submitted to prove that Innova typically required a Bachelor’s degree for the offered position, wherein Innova had stated a requirement for travel to client sites, and used these to support its argument that the beneficiary would be traveling to client sites.  The court had to point out that a showing relevant to the specialty occupation argument did not demonstrate that the beneficiary would also be required to travel.

The jumps and leaps that USCIS made to deny this case truly indicate a complete disregard for the preponderance of the evidence standard. Rather than adhering to the rule of law, USCIS is blatantly more concerned with its agenda to maintain its steady attack on the H-1B visa category. With all the evidence submitted by Innova, it was unquestionably “more likely than not” that its claims were true. While the court didn’t go as far as to state this, it appears that USCIS applied the “beyond all reasonable doubt” standard, the highest standard of proof possible. Thankfully, they were not allowed to get away with it in this instance.  Hopefully, more and more employers are finding the courage to fight back and illuminate for the rest of us, how far USCIS will sometimes go and to provide us with case law that can be cited to prevent future, similar casualties, especially for employers who simply cannot finance a federal law suit. Plucky Innova deserved to win this one even though it has lost previously in other H-1B matters.  RFE responses should remind USCIS that it needs to consider the record as a whole; that USCIS cannot isolate specific statements to try to justify its claims; and that there must be a rational connection between any stated reasons for denial and the actual facts of the case. And, as if H-1B petitions haven’t gotten hard enough, it may behoove us to sit with each piece of evidence and try to imagine how it could possibly be misinterpreted or reimagined to justify a denial. Although, try as we might, some things are just unimaginable.

 

 

Cyrus Mehta

The Draconian Documentation Regime For Third Party Arrangements in H-1B Visa Petitions

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The attacks on the H-1B visa program by the Trump administration continue unabated. On February 22, 2018,  U.S. Citizenship and Immigration Services (USCIS)  published a policy memorandum entitled Contracts and Itineraries Requirements for H-1B Petitions Involving Third-Party Worksites (Third-Party Memo) clarifying that USCIS may request detailed documentation to ensure that a legitimate employer-employee relationship is maintained while an employee is working at a third-party worksite.

USCIS said this clarifies existing regulatory requirements relating to H-1B petitions filed for workers who will be employed at one or more third-party worksites. “This policy memorandum makes clear that employers must provide contracts and itineraries for employees who will work at a third-party location,” USCIS said. The guidance explains that for an H-1B petition involving a third-party worksite to be approved, the petitioner must show by a preponderance of evidence that, among other things:

  • The beneficiary will be employed in a specialty occupation; and
  • The employer will maintain an employer-employee relationship with the beneficiary for the duration of the requested validity period.

When H-1B beneficiaries are placed at third-party worksites, petitioners must demonstrate that they have specific and non-speculative qualifying assignments in a specialty occupation for that beneficiary for the entire time requested on the petition, the guidance states. While an H-1B petition may be approved for up to three years, USCIS will, in its discretion, generally limit the approval period to the length of time demonstrated that the beneficiary will be placed in non-speculative work and during which the petitioner will maintain the requisite employer-employee relationship.

In a related news release to the Third-Party Memo, USCIS said the updated policy guidance aligns with President Trump’s “Buy American and Hire American” Executive Order and directive to protect the interests of U.S. workers. “Employment-based petitioners who circumvent the worker protections outlined in the nation’s immigration laws not only injure U.S. workers (e.g., their wages and job opportunities), but also the foreign workers for whom they are petitioning,” the release stated.

Although the purpose of the Third-Party Memo is to exercise more scrutiny on contractual arrangements with third parties, the USCIS acknowledges that such arrangements may be a legitimate and frequently used business model under the H-1B visa program.  The arrangement typically involves a third-party client who solicits service providers to deliver a product or fill a position at their worksite. In some cases, the petitioner may place the H-1B worker directly with the client. In other cases, there may be one or more intermediaries between the petitioner and the end client, commonly referred to as vendors. As the relationship between the petitioner and the beneficiary becomes more attenuated through intermediaries such as contractors, vendors or brokers, there is a greater need for the petitioner to specifically trace how it will maintain an employer-employee relationship with the beneficiary. For the very first time, the Third-Party Memo drills further into vendor concepts and acknowledges the role of “primary vendors” who have an established or preferred relationship with a client, or “implementing vendors,” who bid on IT projects with a client and then implement the contract using their own staff. Primary and implementing vendors will turn to secondary vendors to fill staffing needs on individual projects. USCIS acknowledges that the ultimate client project may be staffed by a team of H-1B beneficiaries who were petitioned by different, unrelated employers.   USCIS will need corroborating evidence to substantiate a claim of actual work in a specialty occupation, such as contracts and work orders, including documentation to show the relationship between the petitioner, intervening vendors and the end client.

The need to document such third-party arrangements is not new. The USCIS has used Donald Neufeld’s January 2010 guidance (“Neufeld Memo”) to provide a framework for demonstrating that an employer-employee relationship exists.  According to the Neufeld Memo, “The petitioner will have met the relationship test, if, in the totality of the circumstances, a petitioner is able to present evidence to establish its right to control the beneficiary’s employment. In assessing the requisite degree of control, the officer should be mindful of the nature of the petitioner’s business and the type of work of the beneficiary.” The Neufeld Memo emphasized the need for the petitioner to demonstrate its right to control the employment of the H-1B worker. As the relationship got more attenuated through intermediaries, USCIS has questioned the petitioner’s right of control over the beneficiary’s employment through requests for evidence. The new policy guidance recognizes the existence of intermediaries such as vendors as legitimate under the H-1B visa program. However, the Third-Party Memo suggests that in addition to contracts and work orders, the petitioner may be able to demonstrate that the beneficiary has an actual work assignment in a specialty occupation by providing a combination of the following or similar types of following evidence:

  • Evidence of actual work assignments, which may include technical documentation, milestone tables, marketing analysis, cost-benefit analysis, brochures, and funding documents.
  • Copies of relevant, signed contractual agreements between the petitioner and all other companies involved in the beneficiary’s placement, if the petitioner has not directly contracted with the third-party worksite.
  • Copies of detailed statements of work or work orders signed by an authorized official or the ultimate end-client companywhere the work will actually be performed by the beneficiary. The statement should detail the specialized duties the beneficiary will perform, the qualifications that are required to perform the job duties, the duration of the job, and the hours to be worked.
  • A letter signed by an authorized official of each ultimate end-client company where the beneficiary will actually work. The lettershould provide information, such as a detailed description of the specialized duties the beneficiary will perform, the qualifications required to perform those duties, the duration of the job, salary or wages paid, hours worked, benefits, a detailed description of who will supervise the beneficiary and the beneficiary’s duties, and any other related evidence.

(Emphasis added.)

The need to submit detailed statements from the end-client company documentation regarding the specialized duties that the H-1B beneficiary will perform, as well as the qualifications that are required to perform those duties, would be extremely onerous. Since the end-client is not the ultimate employer of the beneficiary, most clients would be reluctant to provide such letters. Indeed, providing such letters would be tantamount to acknowledging an employment relationship with the beneficiary, which the end client has avoided by arranging to contract with the petitioner or intervening vendors for a project or to fill positions.

Requiring the end client to provide a detailed discussion of the assignment and its requirements would directly contradict the Neufeld Memo, which insists that the employer has the right of control over the H-1B beneficiary’s employment. If the end client sets the requirements for the position, then the end client would be acting as the employer and controlling the H-1B worker’s employment. This would have other implications for the end client under a joint employer liability theory, and it would not be surprising for an end client to be reluctant in providing a detailed statement about the position and its requirements, especially when its relationship with the petitioner is attenuated through layers of vendors. However, in Defensor v. Meissner, 201 F.3d 384 (5th Cir 2000), the Fifth Circuit held that if the H-1B worker is placed at a third-party client site, it is important to demonstrate that both the petitioning employer and the client require a bachelor’s degree in a specialized field. The USCIS frequently cites   Defensor v. Meissner in requests for evidence requiring further details about the position from the end client even while it requests evidence relating to the petitioning employer’s right of control over the H-1B worker’s employment at the client’s worksite. In some ways, Defensor v. Meissner contradicts the requirements under the Neufeld Memo, although immigration practitioners are not unfamiliar in playing the role of contortionist when making arguments on behalf of clients that are subject to the USCIS’s contradictory requirements! Perhaps the conflict between Defensor v. Meissner and the Neufeld Memo can be reconciled because the petitioner must demonstrate that it has the right of ultimate control over the H-1B worker’s employment in order to demonstrate the employer-employee relationship even though there could be more immediate control by the client at its worksite.

When the end client is reluctant to issue further details of the H-1B worker’s employment, the supplementary guidance to the Neufeld Memo issued in March 12 2012 (March 2012 Supplementary Guidance) could also come to the rescue.  USCIS noted that the Third-Party Memo is intended to be read together with the Neufeld Memo and as a complement to that policy. The March 2012 Supplementary Guidance further clarifies that a petition involving a third-party worksite may be approved if the petitioner can demonstrate that it will retain the right to control the beneficiary. A number of different forms of documentation may be provided to demonstrate that a right to control exists, such as a letter from the end-client, but such a letter is not an actual requirement.  Question 5 of the March 2012 Guidance states as follows:

Q5: Am I required to submit a letter or other documentation from the end-client that identifies the beneficiary to demonstrate that a valid employer-employee relationship will exist between the petitioner and beneficiary if the beneficiary will perform services at an end-client/third-party location?

A5: No. While documents from the end-client may help USCIS determine whether a valid employer-employee relationship will exist, this type of documentation is not required. You may submit a combination of any documents to establish, by a preponderance of the evidence, that the required relationship will exist. The types of evidence listed in the memorandum are not exhaustive. Adjudicators will review and weigh all the evidence submitted to determine whether you have met your burden in establishing that a qualifying employer-employee relationship will exist. (Emphasis added.)

Furthermore, Question 13 of the March 2012 Guidance states as follows:

Q13: The memorandum provides an example of when a computer consulting company had not established a valid employer-employee relationship. Are there any situations in which a consulting company or a staffing company would be able to establish a valid employer-employee relationship?

A13: Yes. A consulting company or staffing company may be able to establish that a valid employer-employee relationship will exist, including where the beneficiary will be working at a third-party worksite, if the petitioning consulting or staffing company can demonstrate by a preponderance of the evidence that it has the right to control the work of the beneficiary. Relevant factors include, but are not limited to, whether the petitioner will pay the beneficiary’s salary; whether the petitioner will determine the beneficiary’s location and relocation assignments (i.e. where the beneficiary is to report to work); and whether the petitioner will perform supervisory duties such as conducting performance reviews, training, and counseling for the beneficiary. The memorandum provides a non-exhaustive list of types of evidence that could demonstrate an employer-employee relationship. (Emphasis added.)

Questions & Answers: USCIS Issues Guidance Memorandum on Establishing the “Employee-Employer Relationship” in H-1B Petitions, rev. March 2012.

Despite the issuance of the Third-Party Memo insisting on further details about the H-1B worker’s job duties and requirements from the end client, petitioners may also want to point to the March 2012 Supplementary Guidance to the Neufeld Memo, which has not been reversed. Thus, when a document may not be available, a petitioner can point to the March 2012 Supplementary Guidance and provide a combination of any documents to establish, by a preponderance of the evidence, that the employer-employee relationship will exist. The Third-Party Memo puts additional obstacles. It rescinds a prior 1995 policy guidance and insists that a precise itinerary be submitted that requires services to be performed in more than one location. The prior guidance only required general statements, but the Third-Party Memo requires exact dates of employment and the locations of the services to be performed. The itinerary should detail when and where the beneficiary will be performing the services, and the Third-Party Memo sternly asserts that there can be no exception from the regulatory requirement at 8 CFR 214.2(h)(2)(i)(B).

On the other hand, the itinerary should only be required when the services will be performed at more than one location. If the H-1B worker will only be placed at only one client location, then there should be no insistence on an itinerary by the USCIS.  If the work assignment should change later and cannot be anticipated at the time of filing the H-1B petition, resulting in a change of location, Matter of Simeio Solutions, LLC, 26 I&N Dec. 542 (AA0 2015), has already contemplated this and requires an employer to file an amended H-1B petition if the change of location requires a new Labor Condition Application. The USCIS should not be asking for an itinerary when the new job location cannot be anticipated, but the petitioner will file an amendment pursuant to Matter of Simeio Solutions. But under the Third-Party Memo, if the documentation does not clearly indicate that the work assignment will last for the duration of the proposed H-1B validity period, the petition may be approved for less than three years. At the time of filing an H-1B extension, if the petitioner cannot establish that the petitioner met the H-1B requirements when the worker was placed at the client site, including maintaining the right to control the beneficiary’s employment, the Third-Party Memo suggests that the extension may be denied even if it approved the new petition.

The H-1B visa has long been identified in the mind of its many critics with India, perhaps because of the vigorous use of this visa by Indian nationals, particularly in the IT industry. The Neufeld Memo, along with Matter of Simeio and now the Third-Party Memo, which was inspired by President Trump’s Buy American Hire American Executive Order,   is a direct attack on the business model whose consistent efficiency has promoted reliability and quality in the IT industry, a condition whose existence is directly due to the ability of major technology companies in the United States and throughout the industrialized world to obtain top-drawer talent quickly with flexibility and at affordable prices that benefit end consumers,  promote diversity of product development and more jobs for Americans.  This is what the oft-criticized “job shop” readily provides, which has been recognized as a legitimate business model in the Third-Party Memo. By making possible a source of expertise that can be modified and redirected in response to changing demand, uncertain budgets, shifting corporate priorities and unpredictable fluctuations in the business cycle itself, the “job shop” is, in reality, the engine of technological ingenuity on which progress in the global information age largely depends.  While most would not want to openly admit it, one wonders whether this business model would be so maligned and attacked if it was developed in a Scandinavian country rather than India. Indian H-1B workers have been unfairly disparaged even in the media for displacing American workers as we saw in the Disney episode (see my prior blog, Putting Disney and H-1B Visas in Perspective) without any regard to the benefits these H-1B workers ultimately bring to the American economy.  The fact that the USCIS seeks to restrict this development, rather than to nurture it not only reflects the chronically insular character of U.S. immigration policy but the new siege mentality under the Trump administration that has deprived the nation and its economic system of the capacity for job creation and growth that would otherwise benefit us all. Nowhere is this fortress mentality more evident than in the draconian document regime that was first established under the Neufeld Memo and continues to build up under the Third-Party Memo, where the lines between rhetoric and reality have become blurred, if not totally erased. Yet, even here, the increasingly difficult to comply requirements through successive policy memoranda, including the latest Third-Party Memo, cannot shield American workers from the winds of change that will continue to blow. Far better would it be for the Trump administration and USCIS to welcome what must come by shedding the shibboleths of Buy American Hire American and thereby place such winds at our back.

(The author acknowledges the assistance of Eleyteria Diakopoulous who is a student in the JD program at Brooklyn Law School and is presently an Extern at Cyrus D. Mehta & Partners PLLC)

Cora-Ann Pestaina

Can a STEM OPT Student Be Employed At A Third Party Client Site?

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The most frequently asked question in response to my recent blog entitled, “A Closer Look At The Form I-983 – Training Plan for STEM OPT Students”,  is whether a STEM OPT student can be employed at a third party client site or at multiple client sites. I would argue that the answer to this question ought to be YES! Since the new rule only took effect on May 10, 2016, there isn’t yet any strong anecdotal evidence on whether Designated Student Officers (DSO) will approve Forms I-983 which set forth training to take place at client sites. However, there isn’t anything in the governing regulations that expressly forbids this type of employment.

This is a big issue for many students and employers because under the standard 12-month OPT program, the employer may employ the student in a regular job, even at third party sites, as long as the employment is related to their major area of study in the US. However, in order for the student to obtain a 24-month STEM OPT extension, the employer and student, through the submission of the Form I-983 to the DSO, must demonstrate that the student will be employed only as a trainee. The Form I-983 specifically requires the employer to attest that the student will “receive on-site supervision and training by experienced and knowledgeable staff” and that the employer “has sufficient resources and personnel to provide the training and is prepared to implement the program.” Department of Homeland Security (DHS) has made it clear in the preamble to the new regulations that the STEM OPT extension is not apt for certain types of employment arrangements which include multiple employer arrangements, sole proprietorships, employment through “temp” agencies, employment through consulting firm arrangements that provide labor for hire, and other relationships that do not constitute a bona fide employer-employee relationship. Students cannot qualify for STEM OPT extensions unless they will be bona fide employees of the employer signing the Form I-983, and the employer that signs the Form I-983 must be the same entity that employs the student and provides the practical training experience.

None of the above listed requirements prevent the employment of a STEM OPT student at a third-party client site. I would argue that the issues surrounding such employment are similar to the issues surrounding the employment of an H-1B beneficiary at a third party client site. In the case of the H-1B, the employer must also establish that a valid employer-employee relationship will exist with the H-1B beneficiary throughout the requested H-1B validity period. By now, most H-1B employers are used to the USCIS requirements published in its memo entitled, “Determining Employer-Employee for Adjudication of H-1B Petitions, Including Third-Party Site Placements” (“the Neufeld Memo”). Under the Neufeld Memo, in considering whether or not there is a valid “employer-employee relationship,” USCIS must determine if the employer exercises a sufficient level of “control” over the prospective H-1B employee. To demonstrate control, the employer can submit various evidence including a copy of its employment agreement with the prospective employee; copies of its contractual agreement(s) with the end client where the employee will work; a letter from the end client describing its relationship with the employer and the prospective employee; sample staff evaluation forms to demonstrate how the employee will be evaluated; a clear description of how employee supervision will be conducted; a list of the various benefits provided to the employee by the employer; and so on.

I would argue that similarly, in the case of the STEM OPT student, the employer should be able to satisfactorily demonstrate its control over the student despite placement of the student at an end client site. Under the final rule, the Form I-983 must, among other things: (1) Identify the goals for the STEM practical training opportunity, including specific knowledge, skills, or techniques that will be imparted to the student; (2) explain how those goals will be achieved through the work-based learning opportunity with the employer; (3) describe a performance evaluation process; and (4) describe methods of oversight and supervision. Admittedly, having the student work at a client site makes for a more difficult case. However, if the employer already has employees at that site who can implement the employer’s training program by providing the training, on-site supervision and evaluation of the student, then the Form I-983 ought to be approvable.  The employer may face a more insurmountable hurdle in a case where the student would be its only employee stationed at the client site. In such a case it would be very difficult to argue that the employer will provide a structured and guided work-based learning experience for the student, although a case could still potentially be made for a bona fide training program if the employer has ready access at the site to supervise the trainee.

With regard to multiple worksites, in the preamble to the regulations, DHS made it clear that the Form I-983 may incorporate provisions for project, position, or department rotations that directly relate to the STEM student’s field of study, provided there will be appropriate supervision during each rotation and the employer otherwise meets all relevant requirements. Similarly, changes in client site locations can be well documented and explained upon submission of the Form I-983. New and previously unforeseen changes can always be addressed through the preparation and submission of a modified Training Plan to the DSO.

The fact that the Form I-983 must be submitted to the DSO and not to DHS is significant because with filings submitted to DHS, there is usually a filing fee and the potential for costly (time and money) rejections by an inaccessible, unseen and unknown officer. A DSO is an individual who is typically more accessible. Should the DSO not approve the initial Form I-983, there should, hopefully, be more of an opportunity for the employer and student to understand the Training Plan’s defects and to provide additional information in a new submission.

The new STEM OPT rule would allow talented students who have graduated from US universities in vital STEM fields to remain for an additional 24 months. As a result, the rule must encompass all kinds of modern work arrangements, including working at third party sites. Otherwise, entire industries, including IT, management consulting or accounting, would be deprived of engaging talented foreign students. Foreign students can also benefit by receiving training in industries whose business model relies on assigning employees to third party client sites. It is industries that rely on assigning workers to third party sites that give American businesses a competitive edge by providing them with much needed flexibility. They should not be left out from the new rule!

Cyrus Mehta

Suffocating The Foreign Entrepreneur Under The New STEM Optional Practical Training Rule

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Facebook is a good example of an epically successful entrepreneurial venture that was hatched by students in the dorms of Harvard. It is important to allow students who have great dreams and ideas to flourish through startups, and this applies to foreign students who graduate from American universities. Why not encourage foreign students to launch their startups in the United States rather than boot them out?  In our imperfect immigration system that has no true startup visa for the entrepreneur, it makes sense to allow a talented and driven foreign student to use the current nonimmigrant visa categories to establish startups, which in turn can potentially lead to economic growth, bring about paradigm shifts and create millions of new jobs.

This was recognized in the USCIS Entrepreneur Pathways portal, especially with respect to the ability of foreign students to use the optional practical training (OPT) to launch their own ventures. On March 11, 2016, the Department of Homeland Security (DHS) published a final rule amending regulations to expand OPT for students with U.S. degrees in science, technology, engineering, or mathematics (STEM), but also dramatically create new obligations for F-1 students and F-1 employers starting May 10, 2016. While the rule expands STEM OPT from 17 months to 24 months, it creates many more restrictions, and makes it difficult for a student to become an entrepreneur. The new rule requires the establishment of an employer-employee relationship, requiring an employer to complete a formal training plan and make certain attestations, which would render it difficult for the sole founder and owner of a startup to comply and to take advantage of STEM OPT.

OPT is a form of temporary employment available to F-1 students (except those in English language training programs) that directly relates to a student’s major area of study in the United States. A student can apply to engage in OPT during or after completing his or her academic program. A student can apply for 12 months of OPT at each education level (e.g., one 12-month OPT period at the bachelor’s level and another 12-month period at the master’s level). While school is in session, the student may work up to 20 hours per week pursuant to OPT.

DHS first introduced an extension of OPT for STEM graduates in a 2008 interim final rule. Under the 2008 rule, an F-1 student with a STEM degree from a U.S. institution of higher education could apply for an additional 17 months of OPT (17-month STEM OPT extension), provided that the employer from which the student sought employment was enrolled in and remained in good standing in the E-Verify employment eligibility verification program. The Entrepreneur Pathways, as it applied to entrepreneurs utilizing the 17-month OPT did not interpret the existing rule as requiring a rigid employer-employee relationship. On August 12, 2015, the U.S. District Court for the District of Columbia ordered the vacatur of the 2008 rule on procedural grounds and remanded the issue to DHS. The court stayed the vacatur until February 12, 2016, to give DHS the opportunity to issue a new rule related to STEM OPT extensions through notice-and-comment rulemaking.

On October 19, 2015, DHS published a notice of proposed rulemaking (NPRM) to reinstate the STEM OPT extension, with changes intended to enhance the educational benefit afforded by the extension and to increase program oversight, including safeguards to protect U.S. workers. The rule received more than 50,500 comments—the most in DHS history. On January 23, 2016, the court gave DHS additional time to complete the rulemaking following review of public comments and to allow the Department to publish the rule with a 60-day delayed effective date to provide sufficient time for efficient transition to the new rule’s requirements.

DHS has now completed the final rule. Highlights include:

Extension period to increase from 17 to 24 months. Under the amended regulations, F-1 STEM students will be able to extend OPT for an additional 24 months beyond the initial 12 months, replacing the 2008 regulation that allowed F-1 STEM students to receive a 17-month extension of OPT, providing work authorization for employment related to their field of study. The extension from 17 to 24 months is indeed salutary as it would allow the STEM student to continue to be employed in the US even if he or she missed out on the H-1B lottery, and to re-apply for the lottery in the following year.

New reporting requirements for F-1 students and university officials. New reporting requirements include: (1) a six-month validation requirement, confirming the F-1 student applicant’s application for work authorization through the OPT program; (2) an annual self-evaluation required of F-1 students, for designated school officials to review; and (3) an affirmative requirement for F-1 students to report any change in employment status or material departure from the adopted Training Plan. This is in addition to the requirement for F-1 employers to report similar changes to designated school officials within five business days, which remains in effect.

F-1 employer requirement to complete formal Training Plan with F-1 student. The new regulations will increase DHS oversight over the OPT program. F-1 employers must complete a formal Training Plan, Form I-983, and comply with new wage requirements. The formal Training Plan must include concrete learning objectives with proper oversight. F-1 employers must set out the terms and conditions of employment, including the specific duties, hours, and compensation.

As part of the Training Plan, F-1 employers must attest that the F-1 employee is paid a salary commensurate with similarly situated workers and that: “(1) it has sufficient resources and trained personnel available to provide appropriate training in connection with the specified opportunity; (2) the student will not replace a full- or part-time, temporary or permanent U.S. worker; and (3) the opportunity will help the student attain his or her training objectives.”

It is these attestations that are going to be the bane for aspiring foreign student entrepreneurs. Specifically, the attestation requiring the student to not be replacing a full time or part-time US worker, whether temporary or permanent, that has come from left field. This attestation does not currently exist in the H-1B program too for most employers, unless they are dependent H-1B employers and are not petitioning for exempt employees (those who will be paid $60,000 or have advanced degrees). Moreover, the anti-displacement provisions are currently administered by the Department of Labor for dependent H-1B employers, which has had the experience and expertise to define displacement stemming from employment law jurisprudence through carefully crafted rules at 20 CFR 655 . The non-displacement attestation for STEM OPT students will be overseen by Immigration and Customs Enforcement, which has no expertise in these sorts of matters.

The following passage from the preamble to the final rule is worth noting:

             Volunteering and Bona Fide Employer-Employee Relationships

The final rule clarifies issues relating to various types of practical training scenarios and whether such scenarios qualify an F-1 student for a STEM OPT extension. The rule specifically clarifies that a student may not receive a STEM OPT extension for a volunteer opportunity. The rule also requires that a student must have a bona fide employer-employee relationship with an employer to obtain a STEM OPT extension. In response to comments received, DHS clarifies that students may be employed by start-up businesses, but all regulatory requirements must be met and the student may not provide employer attestations on his or her own behalf.

While this portion of the preamble acknowledges that students may be employed by start-up businesses, it does signal the death knell for the entrepreneur who is the sole founder of the startup as it does not allow the student to provide employer attestations. DHS further clarifies that students in STEM OPT “may be employed by new ‘start-up’ businesses so long as all regulatory requirements are met, including that the employer adheres to the training plan requirements, remains in good standing with E-Verify, will provide compensation to the STEM OPT student commensurate to that provided to similarly situated U.S. workers, and has the resources to comply with the training plan.”  This will be possible in a more elaborate startup potentially involving more than one shareholder so that an employer-employee relationship can be maintained and there are sufficient resources to implement a training plan.

The preamble also notes that alternate forms of compensation may be allowed, such as stock options, so long as the student can remain a bona fide employee, and such compensation is commensurate with what is provided to similarly situated workers. In fact, new 8 CFR 214.2(f)(10)(ii)(C)(8) provides that if an employer does not have other similarly situated workers, which would be the case in a startup, the employer is still obligated to attest that the compensation and other terms would be commensurate with other US workers in the area of employment.

While all this appears that students can avail of STEM OPT at startups, it would be difficult to do so, as experience has shown with the H-1B program under the Neufeld Memo, that requires a rigid and inflexible demonstration of the employer-employee relationship. The more flexible employment arrangements, which included self-employment, in prior ICE SEVICS guidance that would have been more conducive for the entrepreneur have all now been thrown out of the window under the new regulation. The saving grace is that the less rigid format still exists under the initial 12-month OPT, and thus an aspiring entrepreneur could start out in a more freewheeling way, and then develop a structured entity with an employer-employee relationship during the 24-month STEM OPT period. This would also pave the way for the startup to secure an H-1B visa, should the petition be selected under the annual lottery, which also would impose the same employer-employee requirement.

DHS to conduct on-site visits. The new regulations state that DHS has discretion to conduct employer site visits to ensure that F-1 employers meet the requirements of the OPT program. Generally, DHS must provide notice 48 hours before an on-site inspection, unless the visit is conducted in response to a complaint or evidence of noncompliance. As noted, the site visits will be conducted by DHS officials who may have no expertise in determining whether the student is being paid the salary commensurate to other similar workers or whether the employer has displaced US workers. Moreover, while the preamble contemplates employment at startups, there is nothing in the actual rule that clarifies this, making it harder to convince the untrained site visitor that a bona fide employer-employee relationship is possible even in a startup.

Cap-gap extension language clarified. DHS has revised the cap-gap extension regulation to clarify that the extension for F-1 students with pending H-1B petitions and requests for change of status temporarily extends the OPT period until October 1, the beginning of the new fiscal year.

Transition Procedures.   A student may still file for STEM OPT 17-month extension up to May 9, 2016.  However, as a practical matter, if this extension is still pending as of May 10, 2016, the USCIS will issue a Request for Evidence (“RFE”) so that the student may amend his or her application for the 24-month extension without incurring additional fees or having to refile the Form I-765, Application for Employment  Authorization.  Therefore, given that the USCIS is granting a 90 day processing time for STEM extension applications, an application filed today may likely not get approved by May 9, 2016 under the existing rule.

Students who have valid 17-month STEM OPT prior to May 10, 2016 will not automatically be extended to 24 months.  Those who are under the 17-month STEM OPT rule are not subject to the new requirements imposed under the 24-month rule.   On the other hand, they may apply for an additional 7-month extension if they choose to, but a self-employed entrepreneur who is the sole founder with no employer-employee structure would need to alter the business model.  The qualifying student must meet the following requirements and must file between May 10, 2016 and August 8, 2016 for the additional 7 months:

  1. The student must meet all the requirements for the 24-month STEM OPT extension under the new Final Rule as described in 8 CRR 214.2(f)(1)(ii)(C), and
  2. must submit of the Training Plan (Form I-983), completed by the student and the employer, to the DSO, and
  3. must have 150 calendar days remaining on their current 17-month STEM OPT Extension at the time the Application for Employment Authorization is filed, and
  4. must apply within 60 days of the date the DSO enters the recommendation for 24-month STEM OPT.

Additionally, the final rule states:

  • Only students who earned a degree from a school accredited by a U.S. Department of Education-recognized accrediting agency and certified by the Student and Exchange Visitor Program (SEVP) may apply for a STEM OPT extension.
  • Participating students who receive an additional qualifying degree from an accredited college or university can apply for a second STEM OPT extension.
  • Participating students can use a previously earned qualifying degree to apply for a STEM OPT extension. The prior degree must not have already formed the basis of a STEM OPT extension and must be from a school that is both accredited by a U.S. Department of Education-recognized accrediting agency and certified by SEVP at the time of the student’s STEM OPT application. The student’s most recent degree must also be from an accredited and SEVP-certified institution.
  • Students must work at least 20 hours per week per employer to qualify.
  • Students are permitted a limited period of unemployment during the initial period of post-completion OPT and the STEM OPT extension.
  • All STEM OPT employers must participate in DHS’s E-Verify program.

Also on March 11, 2016, SEVP launched a STEM OPT Hub at https://studyinthestates.dhs.gov/stem-opt-hub. The Hub includes resources for students, designated school officials, and employers.

While the 24 months provides a good opportunity for a foreign student to remain in the United States after graduating especially in light of the uncertainties under the H-1B lottery, this student will also be subject to several new and novel restrictions, and it remains to be seen how they will be enforced through DHS site visits. Although the F-1 STEM OPT program had nothing to do with the opprobrium caused by the layoff of US workers at Disney and other large US employers by H-1B workers, that effect has unfortunately spilt into these new STEM OPT rules. These rules now require novel compensation and non-displacement attestation, which in turn would dissuade the foreign student from founding a startup unless it can accommodate other overseers and busybodies who would serve as trainers and employers. When protectionism, whether in the spheres of trade or jobs, has become the flavor of the season, the tantalizing possibility of a foreign entrepreneur exponentially enhancing trade and jobs has sadly taken a back seat.