Foreign Workers in the United States Must Meet Detailed Requirements
Many companies in the United States seek to hire foreign workers. If these workers come to the United States, they usually need an H-1B visa. Use of this visa requires the employer to demonstrate that there are not enough qualified United States workers able, willing, qualified and available to perform the work at the local prevailing wage. This post provides a bird’s eye view of how the H-1B visa process works, the responsibilities of the company and the worker, whether the company may hire the foreign worker as an independent contractor instead of an employee, and taxation issues.
The H-1B Visa
The H-1B visa allows a United States employer to employ foreign workers in specialty occupations for a period of three years, although the length of stay is extendable to six years. Only 65,000 H-1B visas may be issued each fiscal year. The federal government’s fiscal year begins October 1.
According to the United States Citizenship and Immigration Services (HSCIS), an H-1B job has four requirements:
A bachelor’s or higher degree or its equivalent is normally the minimum entry requirement for the position.
The degree requirement for the job is common to the industry or the job is so complex or unique that it can be performed only by an individual with a degree.
The employer normally requires a degree or its equivalent for the position.
The nature of the specific duties is so specialized and complex that the knowledge required to perform the duties is usually associated with the attainment of a bachelor’s or higher degree.
USCIS makes the determination whether these requirements have been met.
The H-1B Application Process for Foreign Workers
The first step in the H-1B visa application process is for the employer to “sponsor” the prospective foreign worker to work in the United States. Sponsorship begins with hiring the employee. The employer then submits a “Labor Conditions Approval” (LCA) to the Department of Labor. The LCA includes information about the job such as rate of pay, location of work and what the working conditions will be.
As part of the LCA, the employer also certifies to the Department of Labor that the employee’s rate of pay will be equal to or greater than the prevailing rate of pay for the job in the geographic area where the foreign worker will be employed. This certification protects the foreign worker who otherwise might travel to the United States only to learn that the employer will pay less than previously agreed.
Once the Department of Labor has certified the LCA, the employer must file a Petition for a Nonimmigrant Worker, commonly known as Form I-129, with the USCIS. The Form I-129 sets out information about the employer, the employee and the job. It must be accompanied by the following information and documents:
1. Evidence that an LCA has been certified by the Department of Labor
2. Evidence showing that the proposed employment qualifies as a specialty occupation
3. Evidence showing that the employee has the required degree by submitting either:
1. A copy of a bachelor’s or higher degree earned at a United States institution as required by the specialty occupation
2. A copy of a foreign degree and evidence that it is equivalent to a United States degree; or
3. Evidence of education, specialized training, and/or progressively responsible experience that is equivalent to the required United States degree.
4. A copy of any required license or other official permission to practice the occupation in the state of intended employment; and
5. A copy of any written contract between the petitioner and the employee or a summary of the terms of the oral agreement under which the beneficiary will be employed.
After the petition has been approved, the employee must appear at the either the United States Embassy or a consulate in the employee’s country to process the visa.
Employee or Independent Contractor?
The short answer to this question is that a company may not hire a foreign worker and bring the worker to the United States as an independent contractor on an H-1B visa. When evaluating the application for the H-1B visa, the USCIS looks closely at the application to determine whether there will be a valid employer-employee relationship between the company and the worker. If the USCIS decides that no such relationship will exist, then the USCIS will deny the petition for the H-1B visa.
The essence of the employer-employee relationship is that the employer has the right to control the manner and means by which the work is done. In a memo to Service Center Directors, the USCIS adopted the law set forth in a United States Supreme Court opinion to determine whether an employer-employee relationship exists. The memo states that the USCIS will consider a list of factors to determine whether the relationship exists. Among those factors are:
Will the company supervise the worker, and, if so, off-site or on-site? If off-site, how will the company supervise the worker?
Will the company have the right to control the work of the worker on a day-to-day basis if such control is required?
Will the company provide the worker with the instrumentalities needed for the worker to do the job?
Will the company have the right to hire, pay and fire the worker?
Will the company provide the worker with any type of employee benefits?
Taxation for Employer and Foreign Worker
Because the foreign worker must be an employee of the employer, and not an independent contractor, the employer normally withholds and matches Social Security and Medicare taxes from the employee’s pay just as it does for United States workers.
Taxation for the foreign worker is more complex. It depends on whether the foreign worker is classified as a nonresident alien or a resident alien. In short, the nonresident pays federal income taxes only on income from employment in the United States. A resident alien pays taxes on all income earned, whether it originates in or from outside the United States.
The IRS uses the “Substantial Presence Test” (SPT) to make the determination. A foreign worker is considered a resident of the United States if that person was physically present in the United States for at least 31 days during the current year and at least 183 days during a three-year period. The three-year period includes all the days of physical presence in the current year, one-third of the days of presence for the prior year, and one-sixth of the days of presence for the second prior year.
A Decision for the Employer
There is a great deal of paperwork involved in bringing a foreign worker to the United States. The number of visas is capped. The worker must be an employee and the worker might well suffer adverse tax consequences if the worker also receives money from outside the United States. Foreign workers are badly needed, so bringing them to the United States may be the only feasible solution to a labor shortage. But if the worker can reliably work remotely, and the job duties are such that remote work would be practicable, then the employer should consider hiring the worker as an independent contractor without bringing the worker to the United States.
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