Federal Lawsuit Challenges the January 2010 Neufeld Memo on Employer-Employee Relationship

We have written extensively in the past regarding the January 8, 2010 Neufeld Memo which introduced guidance requiring H-1B applications to show proof of employer-employee relationship between the H-1B petitioner and beneficiary.  The Neufeld Memo has affected mostly staffing and consulting companies where the H-1B beneficiaries are employed at third-party worksites.

USCIS Sued to Prevent Enforcement of the Neufeld Memo Guidelines

In a five-count complaint filed by a coalition of staffing companies and representative trade associations, the USCIS is asked to stop temporarily and permanently from applying the Neufeld Memo in H-1B adjudications.  The case is Broadgate v. USCIS and is assigned to Judge Kessler at the U.S. District Court for the District of Columbia.

The complaint alleges that the Neufeld Memo abruptly altered long-standing agency policy which has permitted companies from placing H-1B workers at third-party job sites.  The complaint further alleges that existing USCIS guidelines specify that an employer-employee relationship does exists when the petitioner company may “hire, pay, fire, supervise, or otherwise control the work of any such employee.”  The plaintiffs in this case claim that the Neufeld Memo constitutes a legislative regulation because it sets forth new binding standards that prevent employers that place employees at third-party worksites, but which otherwise meet the regulatory definition, from sponsoring H-1B nonimmigrants.

The complaint alleges that the new policy (i) is contrary to existing law and regulations, (ii) is arbitrary and capricious because the government failed to articulate a policy justification, (iii) violates the Administrative Procedure Act notice-and-comment requirements, and (iv) should have been issued following a certification under the Regulatory Flexibility Act (which requires regulators to consider the potential impact of regulations on small business).

Conclusion: More to Follow

Our office has been very involved in this issue from the publication of the Neufeld Memo and we have seen the impact of the memo on H-1B adjudications and RFEs.   USCIS has been under some pressure to amend the Neufeld Memo, at least in some respects, and this lawsuit is certain to put more pressure on resolving this controversy.  We will continue monitoring this case and the Neufeld Memo developments coming out of USCIS and will provide updates.  In the meantime, please do not hesitate to contact us or subscribe to our free weekly newsletter.