THE NEUFELD MEMO REVISITED AND THE H-1B VISA CLIMATE: The New Face of Enforcement in the H-1B World, Part II

This is the continuation of a series of articles on the Neufeld Memo, published on January 8, 2010, which radically changed the way that H-1B’s were adjudicated. The Neufeld Memo put enormous pressure on employers to satisfy additional evidence requirements justifying any work performed by an H-1B visa holder off to the H-1B visa petitioner’s premises.

The USCIS has specifically stated that the following scenarios are now NOT acceptable to meet the “control” issue with regard to H-1B employment:

The “Self-Employed Beneficiaries” Scenario:

The prospective H-1B nonimmigrant petitioner is a fashion merchandising company that is owned by the beneficiary. The beneficiary is a fashion analyst. The beneficiary is the sole operator, manager, and employee of the petitioning company. The beneficiary cannot be fired by the petitioning company. There is no outside entity which can exercise control over the beneficiary. The petitioner has not provided evidence that the corporation, and not the beneficiary herself, will be controlling her work.

The above example (cited in the Neufeld Memo) is similar to a case recently addressed by our office for one of our clients. We have successfully processed a case such as this in the past. However, it is likely that these facts will inevitably lead to a much more complex H-1B case processing procedure by the government.

The USCIS admits that a sole stockholder of a corporation can be employed by a corporation as the corporation is a separate legal entity from its owners and even its sole owner. However, an H-1B beneficiary/employee who owns a majority of the sponsoring entity and who reports to no one but him or her may not be able to establish that a valid employment relationship exists in that the beneficiary. The issue is whether the prospective H-1B nonimmigrant petitioner can establish the requisite “control.”

The Neufeld Memo states that the Administrative Appeals Office (“AAO”) correctly determined that corporations are separate and distinct from their stockholders and that a corporation may petition for and hire their principal stockholders as H-1B nonimmigrant employees. However, the AAO did not reach the question of how, or whether, petitioners must establish that such beneficiaries are bona fide “employees” of “United States’ employers,” having an “employer-employee relationship.” While it is correct that a petitioner may employ and seek H-1B classification for a beneficiary who happens to have a significant ownership interest in a petitioner, this does not automatically mean that the beneficiary is a bona fide employee.

What we believe that the USCIS is saying is that if a corporation’s sole shareholder and sole employee is the H-1B nonimmigrant beneficiary, the case is likely to be denied. If the H-1B nonimmigrant beneficiary is one of several shareholders (not a majority shareholder of the corporation and is NOT the sole employee), then the USCIS can approve the case. It appears to be the case that any person who has a small company, where the H-1B beneficiary is one of the main officers or shareholders of the company, will have a very difficult time obtaining an H-1B approval. This was one of the new rules that came out of the Neufel