A group of US staffing companies with extensive operations in India have filed a lawsuit challenging new H-1B visa rules introduced by the Trump administration that they argue cause them “irreparable harm” and pose an “existential threat to their business model”.

The suit, filed in a New Jersey federal court on Tuesday, targets a February policy memo issued by the US Citizenship and Immigration Services (USCIS), which oversees a significant part of the H-1B visa programme. The memo imposed significant restrictions on deployment of such workers at third-party work sites, which is how staffing companies work, also called outsourcing.

The Trump administration has introduced a series of changes in the H-1B visa programme in line with the president’s “Buy American, Hire American” executive order issued last year, with the stated aim of protecting jobs for Americans and preventing the use of the scheme to displace local workers.

The changes have impacted Indian companies and workers, who are the largest beneficiaries of the programme. US subsidiaries of Indian IT firms Infosys, TCS and Wipro are among top recipients of H-1Bs and Indian workers have tended to bag almost 70% of the visas, according to a 2016 study.

Jonathan Wasden, the lead attorney for the companies, said the USCIS, in issuing the order, encroached on the jurisdiction of the US department of labour, which administers part of the H-1B programme regarding wages and working conditions. It had already laid down clear rules for third-party work sites, he said.

The new rules demand that employers retain direct control over employees hired on H-1B visas, even when deployed at third-party locations and that they must file their precise itinerary – how long will they work and for whom – with the visa applications. This was not the case earlier, as laid down by the department of labour, according to Wasden.

The lawsuit asked the court to “prohibit and enjoin” the USCIS from violating the separation of powers and responsibilities and to keep the agency from introducing “unlawful requirements in the H-1B process”, he added.

The case was filed by a trade body Small and Medium Enterprises Consortium and two New Jersey-based staffing companies NAM Info and Derex Technologies, which have offices also in India..

The consortium could not be reached for comment, and a response was awaited from the two companies.

The lawsuit says, “Defendants’ (USCIS) unlawful requirements will eventually choke out plaintiff’s work force through extension denials and refusing initial H-1B application. If left unchecked, Defendants will destroy Plaintiffs and hundreds of similar companies across the country.”

The USCIS refused to speak on the matter, saying it “does not comment on pending litigation”.

Immigration experts and lawyers around the US are watching the progress of this lawsuit, waiting to see, as immigration lawyer Chirag Patel of Maryland put it, if it will have the same beneficial effect on the H-1B programme as other lawsuits have had on Donald Trump’s travel ban and a proposal to end the regulation preventing the deportation of undocumented immigrants brought to the US as children.

“There have been recent changes as of last season’s H-1B visa lottery by the (USCIS) going beyond the framework established by Congress,” Patel said.

The US grants 85,000 H-1B visas to American companies to hire foreign workers for speciality occupations that they are unable to fill locally. Critics of the programme, which include Trump and other members of the administration, argue it is being used to displace American workers with foreigners on lowers wages.

Responses to requests for comment were awaited from Nasscom, the trade body of Indian IT companies, and FWD.US, a body that represents top American IT companies such as Facebook and Google, which has been lobbying Congress and the administration against restrictive rules, such as the plan to rescind work authorisation for spouses of H-1B visa holders cleared for permanent residency (green card).