AAO Decides Two Cases—Definition of 'Doing Business' and Material Change in Place of Employment
U.S. Citizenship and Immigration Services' (USCIS) Administrative Appeals Office (AAO) recently decided two cases of interest.
- In Matter of Leaching International, Inc., 26 I&N Dec. 532 (AAO 2015), in which the petitioner's appeal was sustained, the AAO noted that the petitioner is a U.S. subsidiary of a Chinese clothing manufacturing company that filed an Immigrant Petition for Alien Worker (Form I-140) to classify the beneficiary as a multinational manager or executive. The petitioner sought to employ the beneficiary in the position of deputy general manager. The Texas USCIS Service Center Director denied the petition, finding that the petitioner failed to establish that it had been doing business for at least one year as of the date the petition was filed.
Established in New York in 2008, the petitioner imports and sells the Chinese parent company's products to United States customers, primarily major clothing retailers. The petitioner directly performed these sales activities through 2011. However, beginning on or about January 2012, it provided marketing, sales, and shipping services in the United States pursuant to a service agreement with its Hong Kong affiliate, which previously employed the beneficiary and was owned by the Chinese parent company.
The Service Center Director concluded that the petitioner was not doing business as required by the regulations, reasoning that the petitioner’s evidence "do[es] not indicate 'doing business' with independent corporations or entities" for a full year preceding the filing of the petition, but rather "only demonstrate[s] the shipment of goods from the foreign company to the U.S. company." Specifically, the Director found that the petitioner, as a clothing importer, should have provided invoices or evidence of payment of invoices from the customers who purchased the clothing for the year preceding the filing of the petition.
On appeal, the petitioner asserted that the Director erred and that existing case law and regulatory history supported a conclusion that the petitioner is doing business in a regular, systematic, and continuous fashion despite the fact that it is not a named party to contracts with buyers in the United States. The petitioner states that the evidence establishes it acts as an intermediary between its Hong Kong affiliate and the U.S. buyers and suppliers by locating customers and finalizing the details of sales contracts for the benefit of the affiliate.
The AAO noted that the Director’s finding that the petitioner did not submit evidence of doing business with "independent corporations or entities" implies a requirement that a petitioner must transact directly with an unaffiliated third party. In sustaining the petitioner's appeal, the AAO noted, however, that:
(1) The definition of "doing business" at 8 CFR § 204.5(j)(2) (2014) contains no requirement that a petitioner for a multinational manager or executive must provide goods and or services to an unaffiliated third party; and
(2) A petitioner may establish that it is "doing business" by demonstrating that it is providing goods and/or services in a regular, systematic, and continuous manner to related companies within its multinational organization.
Matter of Leaching
- In Matter of Simeio Solutions, LLC, 26 I&N Dec. 542 (AAO 2015), the AAO affirmed the Service Center Director's decision to revoke an petition's approval. Among other things, the Director had concluded that changes in the beneficiary's places of employment constituted a material change to the terms and conditions of employment as specified in the original petition. The changes included different metropolitan statistical areas from the original place of employment, which USCIS agents were unable to find. The Director held that the petitioner therefore should have filed an amended Form I-129 H-1B petition corresponding to a new labor condition application (LCA) that reflected these changes, but the petitioner failed to do so.
In affirming the Director's decision, the AAO held:
(1) A change in the place of employment of a beneficiary to a geographical area requiring a corresponding LCA be certified to USCIS with respect to that beneficiary may affect eligibility for H-1B status; it is therefore a material change for purposes of 8 CFR §§ 214.2(h)(2)(i)(E) and (11)(i)(A) (2014).
(2) When there is a material change in the terms and conditions of employment, the petitioner must file an amended or new H−1B petition with the corresponding LCA.
The AAO noted that petitioners must immediately notify USCIS of any changes in the terms and conditions of employment of a beneficiary that may affect eligibility for H-1B status. Matter of Simeio Solutions, LLC
Commentary. In the past, employers relied on informal guidance indicating that as long as a new LCA was obtained before placing an H-1B worker at a new worksite, an amended H-1B petition was not required. See Letter from Efren Hernandez III, Dir., Bus. And Trade Branch, USCIS, to Lynn Shotwell, Am. Council on int’l Pers., Inc. (October 23, 2003). The AAO now has explicitly stated in Simeio Solutions that the Hernandez guidance has been superseded. Even before the guidance was formally superseded, employers were filing amended H-1B petitions, as consular officers were recommending to USCIS that the H-1B petition be revoked if a new LCA was obtained without an amendment of the H-1B petition. According to the AAO, "[i]f an employer does not submit the LCA to USCIS in support of a new or amended H-1B petition, the process is incomplete and the LCA is not certified to the Secretary of Homeland Security." The AAO cited INA § 101(a)(15)(H)(i)(b), 8 CFR § 214.2(h)(4)(i)B)(1), and 20 CFR § 655.700(b) to support its position, but none of these provisions seems to suggest that an LCA obtained after an H-1B petition has already been submitted is not valid if it is "not certified to the Secretary of Homeland Security." The Department of Labor (DOL) certifies the LCA. There is no separate process where the DOL also has to certify the LCA to the Secretary of Homeland Security.
It is not so much the cost that troubles employers with respect to filing an amended H-1B petition. The USCIS has made it extremely onerous for employers to obtain H-1B petitions especially when an H-1B worker will be assigned to third party client sites. This is a legitimate business model that American companies across the board rely on to meet their IT needs, but USCIS is now requiring an onerous demonstration that the petitioning company will still have a right to control the H-1B worker's employment. Each time the employer files an amendment, USCIS will again make the employer demonstrate the employer-employee relationship through the issuance of a request for evidence (RFE). The employer will thus risk a denial upon seeking an amendment, even though it received an H-1B approval initially on virtually the same facts.
H-1B workers in other industries such as healthcare also get reassigned to different locations, such as physicians, nurses, and physical therapists. They too will be burdened by the need to file amended H-1B petitions each time they move to a new work location.
Arguably, if an H-1B worker is being moved to a new job location within the same area of intended employment, a new LCA is not required, nor will an H-1B amendment be required. The original LCA should still be posted in the new work location within the same area of intended employment.
20 CFR § 655.17 defines “area of intended employment”:
Area of intended employment means the area within normal commuting distance of the place (address) of employment where the H-1B nonimmigrant is or will be employed. There is no rigid measure of distance which constitutes a normal commuting distance or normal commuting area, because there may be widely varying factual circumstances among different areas (e.g., normal commuting distances might be 20, 30, or 50 miles). If the place of employment is within a Metropolitan Statistical Area (MSA) or a Primary Metropolitan Statistical Area (PMSA), any place within the MSA or PMSA is deemed to be within normal commuting distance of the place of employment; however, all locations within a Consolidated Metropolitan Statistical Area (CMSA) will not automatically be deemed to be within normal commuting distance. The borders of MSAs and PMSAs are not controlling with regard to the identification of the normal commuting area; a location outside of an MSA or PMSA (or a CMSA) may be within normal commuting distance of a location that is inside (e.g., near the border of) the MSA or PMSA (or CMSA).
So a move to a new job location within New York City (NYC) would not trigger a new LCA, although the previously obtained LCA would need to be posted at the new work location. This could happen if an entire office moved from one location to another within NYC, or even if the H-1B worker moved from one client site to another within NYC.
The DOL Wage and Hour Division Fact Sheet # 62J also confirms this:
If the employer requires the H-1B worker to move from one worksite to another worksite within a geographic area of intended employment, must the employer obtain an LCA for each worksite within that area of intended employment?
No. The employer need not obtain a new LCA for another worksite within the geographic area of intended employment where the employer already has an existing LCA for that area. However, while the prevailing wage on the existing LCA applies to any worksite within the geographic area of intended employment, the notice to workers must be posted at each individual worksite, and the strike/lockout prohibition also applies to each individual worksite.
The AAO decision in Simeio Solutions further overregulates the H-1B visa. This in turn will deprive U.S. companies of an efficient business model that has provided reliability to companies in the United States and throughout the industrialized world to obtain top talent quickly with flexibility and at affordable prices and scale that benefit consumers and promote diversity of product development. This is what the oft-criticized "job shop" readily provides. 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 pejorative "job shop" is, in reality, the engine of technological ingenuity on which progress in the global information age largely depends. Such a business model is also consistent with free trade, which the United States promotes to other countries but seems to restrict when applied to service industries located in countries such as India that desire to do business in the United States through their skilled personnel.
The Hernandez guidance provided flexibility to employers whose H-1B workers frequently moved among client locations, while ensuring the integrity of the H-1B visa program. Employers were still required to obtain new LCAs based on the prevailing wage in the new area of employment, and also notify U.S. workers. However, they were not required to file onerous
H-1B amendments each time there was a move, and risk further arbitrary and capricious scrutiny. The AAO has removed this flexibility, and has further regulated the H-1B to such an extent that the LCA must now always firmly and securely tether an H-1B worker through an amended petition just like a dog to his leash.
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