We recently advised a client, a Chinese parent company expanding in the U.S. via an L-1 intracompany transfer, who was concerned about labor compliance risks after the Department of Labor (DOL) proposed reinstating the “economic realities” test for joint employer liability under key statutes like the Fair Labor Standards Act (FLSA). This client’s U.S. subsidiary uses subcontractors and has complex employment arrangements, raising questions about potential joint employer exposure.

The proposed DOL rule would replace the more restrictive 2020 joint employer standard with a broader "economic realities" test, which considers factors such as control over wages, hours, and working conditions, the permanence of the relationship, and the nature of the work performed. This means that parent companies or franchisors with indirect control or influence over workers could face increased liability for wage and hour violations, family leave compliance, and migrant worker protections.

From our practice perspective, this development has direct implications for Chinese executives and investors using L-1 or EB-1C visas. These visa categories require clear employer-employee relationships and organizational control between U.S. entities and foreign parent companies (8 CFR §214.2(l)(1)(ii) for L-1 and INA §203(b)(1)(C) for EB-1C). The proposed rule’s broader joint employer definition might complicate USCIS’s evaluation of whether the U.S. entity legitimately controls the executive or manager’s employment conditions.

Attorney Insight
In practical terms, we recommend that our clients conduct a thorough review of their U.S. employment structures, especially where subcontractors or franchise arrangements exist. For example, ensure that the U.S. company directly supervises L-1 or EB-1C visa holders without undue interference from third parties. Additionally, update I-9 forms and maintain meticulous payroll and timekeeping records to demonstrate compliance. We have seen cases where incomplete employment verification or ambiguous control led to RFEs or denials.

One actionable step is to have HR departments submit updated organizational charts and job descriptions that clearly delineate the U.S. entity’s control over the employee. This can be critical evidence for USCIS adjudicators assessing intracompany transfer eligibility. Also, consider the timing of visa petitions: avoid submitting L-1 or EB-1C filings while significant subcontractor disputes or labor investigations are ongoing, as these can raise red flags.

Important Notice
Finally, keep an eye on the public comment deadline (June 22) for the DOL rule and monitor subsequent final rule issuance. Our firm advises clients to prepare for a possible shift in enforcement intensity regarding joint employer liability, which could impact labor costs and compliance burdens. Early adaptation will help secure smoother immigration approvals and reduce legal risks.

In summary, companies sponsoring Chinese executives or managers for L-1 or EB-1C visas should proactively audit their employment practices, emphasize direct control by the U.S. entity, and maintain comprehensive documentation. This approach not only aligns with evolving DOL standards but also supports USCIS’s scrutiny of intracompany employment relationships.

What this means for you: If your company uses subcontractors or has complex employment arrangements in the U.S., now is the time to review and adjust your organizational control structures. Confirm your HR team updates I-9 compliance and prepares clear evidence of direct supervision for visa beneficiaries. These concrete steps will position your immigration petitions for success amid the changing regulatory landscape.