The US Department of Labor announced Friday that it is revising its interpretation of regulations concerning which employers of H-1B visas must file a Labor Conditions Application and H-1B petition. It has found that all common-law employers of H-1B workers — including any secondary employers that meet the common-law test — must file the forms. The agency noted that H-1B employment often involves primary employers, such as staffing firms, and secondary employers, such as client companies of staffing firms.

“Under the interpretation announced today, when a primary employer places an H-1B worker with a secondary employer that is a common law employer of the H-1B worker, such as when a staffing agency places a software engineer with certain technology firms, the secondary employer, in addition to the primary employer, must file a petition and an [Labor Condition Application],” according to the Department of Labor. “As a result, some H-1B workers will have multiple [Labor Condition Applications] and petitions concurrently.”

“This revised interpretation is long overdue in light of the language of the regulations, better comports with the goals of the H-1B program, and is consistent with recent Executive Branch directives,” said Assistant Secretary for Employment and Training John Pallasch.

The new guidance takes effect in 180 days, which means employers must comply with the obligations for the applications filed on or after July 14.

The actions would force the customers of IT services companies to file H-1B petitions and Labor Condition Applications on behalf of H-1B visa holders if they perform work on a customer’s site, even though the customer does not employ or set the pay of the H-1B professional, wrote Stuart Anderson in a Forbes article. Anderson is executive director of the National Foundation for American Policy, a non-partisan public policy research organization focusing on trade, immigration and related issues. He states these additional requirements would likely drive customers away from any IT services companies that send H-1B visa holders to a customer’s location, since few customers want to (or can) take on legal obligations for individuals for whom they do not possess the ability to hire, fire or compensate.

The new rules interpretation follows final rules recently issued regarding the H-1B selection process and wages. However, the Biden administration, which takes over today, could block the implementation of the rule.

“The rule is likely to be politically unpalatable, even to Democrats who disfavor the H-1B visa program, given how overbroad and radical it is, as well as the deleterious impact it would have on the American economy and US companies who use H-1B workers,” immigration attorney Cyrus Mehta writes in a blog post.

Mehta also noted the change will also do “significant harm” to other sectors that involve third-party placements including nursing, consulting, audit, and engineering services among others.

There are conflicting views on what the new Biden administration can do to change the rule, writes Gerald LeMelle in a JD Supra blog post. Some argue that he can simply suspend the rule, while others say that the 60-day delay of the rule only buys time to revoke the rule, which would have to be done by notice and comment or via a court decision striking it down.

“Without question, the rule as it exists will severely impact small businesses, startup companies, public schools, younger information technology professionals, and health professionals working in rural areas,” according to LeMelle.