DOL requiring the Secondary Employers (Third Party Clients) to file the Labor Condition Application (LCA)

January 16, 2021
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DOL is revising its interpretation of its regulations as to which employers must file a Labor Certification Application (LCA). DOL is now classifying staffing companies as ‘primary employer’ and the third-party client as a ‘secondary employer’. The new interpretation of the regulation required the third-party client, the secondary employer, to file the LCA. DOLs’ reasoning for the new interpretation. The DOL is relying on the conventional master-servant relationship under the common law to define the term ‘employer’. Under the common law, the key element in determining the employee-employer relationship is the employer’s right to control the means and manner in which the work is performed. As per DOL, while the primary employer serves as the H-1B worker’s employer for payroll and tax purposes, the secondary employer often exercises considerable control over the worker’s day-to-day work. However, the secondary employers have not been held responsible for complying with the statutory and regulatory requirements of the H-1B program. Meanwhile, on January 15, 2021, USCIS also published a final rule requiring the secondary employers to file an H-1B nonimmigrant visa petition.  Click here to read the new DHS rule. DOL’s effort to regulate the staffing companies in the pretext of interpreting its own regulation.  The DHS has been constants trying to regulate the staffing companies from using the H-1B program, starting with the 2010 “Neufeld Memo” on Employer-Employee Relationship. The memo was an effort to regulate outsourcing and so-called Job Shops. The efforts to litigate the memo in Broadgate v. USCIS was futile. Though it seemed the Neufeld Memo would make it impossible for the staffing companies to file H-1B Petition, USCIS later softened its approach and issued additional guidance wherein introduced an 11-factor test for the staffing companies to successfully petition its employees. Subsequent to the Neufeld Memo, the H-1B denials based on the employee-employer relationship increase multifold. In 2018, in a renewed effort by DHS to regulate the H-1Bs for staffing companies, they published the Contract and Itinerary Memo, which resulted in further denials. The Contract and Itinerary Memo, along with the Neufeld Memo, was challenged by ITServe Alliance, an organization of several IT Companies. The U.S Federal District court in D.C struck down both the memo’s as it violated the APA rules. Subsequent to the ITServe Alliance DHS, on June 17, 2020, rescinded both the 2010 and the 2018 memorandums.   The new interpretation of the regulation issued on January 15, 2021, is a combined renewed effort of the DHS and the DOL to regulate the staffing companies from filing H-1B non-immigrant visa petitions. In the pretext of interpreting its own regulation, the DOL and the DHS are involved in rulemaking, which has to be done through proper notice and comments under the APA.  8 CFR 214.2(h)(4)(ii) is very clear as to who an employer is. The employee-employer is relationship is established in the petitioner can establish at least one of the “hire, fire, supervise, or otherwise control the work of” facto with respect to the beneficiary. Since there is no ambiguity in the definition of the term ’employer’, the DOL or the USCIS’s rulemaking in the pretext of interpretation of the regulation will not stand the challenge before the court. In the past, the Courts in Kisor v. Wilkie and Chevron v. NRDC and several other cases have limited the agency's powers to interprets the regulation when there is no ambiguity in the regulation.   Our office will monitor the developments and will keep updating our clients and readers.
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