Trump admin fires again: Customers of IT service companies to meet H-1B filing & other obligations under new rule – Times of India

MUMBAI: US-based companies, such as IT services companies and staffing companies, that sponsor H-1B visa holders and depute them to work at customer sites have to face a new stumbling block.
A final rule, signed by the US Department of Homeland Security (DHS) on January 14, redefines the term ‘employer-employee relationship’ for the purpose of the H-1B program. Correspondingly, on Friday, the US Department of Labour (DOL), also issued a guidance note.
Customers of companies where H-1B workers are to be deputed, will also have to file for Labour Condition Applications (LCAs) and H-1B applications (referred to as petitions). Not only does this translate into a higher administrative burden and costs for the end-customers, but it also creates employer liability for compliance obligations relating to wages and working conditions.
Currently only the primary employer has to comply with the filing requirements and other obligations. Now this is extended to its customers (the secondary employers). The new guidance comes into effect in 180 days, i.e., for applications filed on or after July 14 (including applications for extensions H-1B visas).
Cyrus D Mehta, founder of a New York based immigration law firm, told TOI, “This Trump rule, issued in the waning days of a failed presidency, has been designed to kill the India heritage IT industry. However, it will also hurt corporate America that relies on this IT industry to keep humming away and remain competitive in the global economy. The change will also do significant harm to other sectors as well that involve third-party placements, including nursing, consulting, audit, engineering services among many others.”
The Trump administration has over the past several days, issued various policies and rules that pose challenges to hiring of H-1B workers – some of these stem from the ‘Buy American, Hire American’ executive order dating back to April 2017. Recent rules include extension of the travel ban for non-immigrant workers, a final rule that would hike wages and this newly announced rule that redefines employer-employee relationships.
US Tech Workers, a non-profit ‘representing American workers harmed by the H-1B program’ seems elated. “…Great way to target companies that use third party IT or staffing firms to displace Americans,” it tweeted.
“When Disney was sued for laying off American workers and replacing them with H-1B workers brought it from third party IT outsourcing firms (Cognizant and HCL), Disney’s defence was that they weren’t the ones who sponsored the H-1B visas. This regulation would now hold them accountable. We will see if these regulations hold long-term. The incoming administration could potentially zap this,” it added in another tweet.
A DOL release states that H-1B employment frequently involves primary employers, such as staffing agencies, that petition to hire H-1B workers, as well as secondary employers, such as staffing agencies’ clients (customers), where the H-1B workers are assigned to work. Under the interpretation announced today, when a primary employer places an H-1B worker with a secondary employer (that is a common law employer of the H-1B worker), such as when a staffing agency places a software engineer with certain technology firms, the secondary employer, in addition to the primary employer, must file a petition and an LCA. As a result, some H-1B workers will have multiple LCAs and petitions concurrently.
“This revised interpretation is long overdue in light of the language of the regulations, better comports with the goals of the H-1B program, and is consistent with recent Executive Branch directives,” said John Pallasch, Assistant Secretary for Employment and Training.
Mehta explains the legal nitty-gritty, “The new rule changes and broadens the definition of the employer-employee relationship by incorporating common law elements to the definition of employer. Even the user of the services of an H-1B worker is now rendered an employer. I can see DHS and DOL deeming that the customer meets the revised definition based on two levels of control – actual control at the client site by the secondary employer and ultimate control by the primary employer.”
Industry watchers and immigration experts are widely of the view that the Biden administration may not follow through with this new rule.

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