Significant Changes Announced in H-1B Regulations for Third-Party Engagements

DHS has announced that it is amending its regulations to clarify how USCIS will determine whether there is an “employer-employee relationship” between the petitioner and the beneficiary for the purposes of an H-1B petition. Following the DHS announcement, DOL also announced that it is revising its interpretation of its regulations concerning which employers of H-1B workers must file a Labor Condition Application. The changes will go into effect only after 180 days.

DHS Amendment

Under the new rule, DHS is expanding upon the employer-employee relationship and the factors used to determine if a valid employer-employee relationship exists or will exist between the petitioner and the beneficiary. The new rule amends the regulatory definition of ‘employer-employee relationship’, and adopts the common-law test for determining which entities have an employment relationship with an H-1B worker. As a consequence, in third-party placement arrangements, where a primary employer contracts out an H-1B worker to a third-party entity, the third-party entity may also be considered an employer of the H-1B worker and will also be required to file a petition for the H-1B worker.

The final rule was signed on January 14, 2021 and will become effective 180 days after its publication in the Federal Register. The new rule will apply only to petitions filed on or after the effective date of the regulation, and will not apply to any H-1B petitions pending as of that day, or to any previously approved H-1B petitions.

DOL Clarification

Following the DHS announcement, DOL issued a Bulletin clarifying the filing requirements for Labor Condition Applications (LCAs) by third-party entities. Under the new interpretation announced by DOL, all common law employers of H-1B workers, including any third-party entities meeting the common-law test, will be required to file an LCA.

We continue to closely monitor the amendments related to H-1B filings, and will keep our readers updated.

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