Lawsuit Filed Against USCIS’ Restrictive Re-interpretation of “Employer/Employee” Relationship

In January 2010, U.S. Citizenship and Immigration Services (USCIS) unveiled a lengthy memorandum that re-defined the employer-employee relationship in immigration cases, such as H-1B work visa requests. The clear intent of the memo was to re-interpret the law to make it almost impossible for employers to place H-1B and other foreign workers at any third-party worksites. Following release of USCIS’ memo, employers filing immigration cases began receiving challenges and denials based on USCIS’ new interpretation of the law.

The recently filed lawsuit charges that the USCIS memorandum is, actually, a “federal rule” or regulation and that USCIS has violated mandatory rulemaking procedures under the Administrative Procedure Act (APA). USCIS’ trend of issuing memoranda – rather than following the public procedure to promulgate regulations – has grown over the years. For example, USCIS’ decisions on H-1B and permanent residence “portability,” a new concept created by the American Competitiveness in the 21st Century Act (AC21), are guided by USCIS memoranda even though Congress passed the AC21 law almost 10 years ago. USCIS has not bothered to propose any implementing regulations regarding these important areas of law.

Issuing agency memoranda rather than proposing regulations self-empowers USCIS to change its own “rules” without considering public comment or abiding by the law that requires assessment of the impact of regulation on small businesses. Basically, USCIS makes its own rules without public input, as required by the APA, and changes the rules, often retroactively, whenever it suits USCIS’ agenda to make changes.

In the lawsuit, Broadgate et al. v. USCIS et al., filed June 8, 2010, three software developers and IT services firms and two non-profit trade associations contend that USCIS issued its memorandum in violation of the Administrative Procedure Act’s notice and comment requirements; USCIS failed to perform a Regulatory Flexibility Act analysis; the memorandum is inconsistent with existing rules regarding the employee-employer relationship and the definition of “contractor” and conflicts with the plain language of the law; and it is arbitrary and capricious. The plaintiffs have asked the court to enjoin USCIS from implementing the memorandum. The lawsuit is pending in the U.S. district court in Washington, DC.