There were companies hiring people under H1B then finding them contract work. Something they are specifically limiting now because they were abusing the system by under paying them as well as hiring them after they get the visa instead of before.
> First, striking “contractor” will avoid potential confusion as the term “contractor” in the definition is misleading. The inclusion of “contractors” in the regulatory language could be read to suggest that contractors should generally qualify under the definition of a “United States employer.” While a contractor is certainly not excluded from qualifying as a “United States employer” for purposes of an H-1B petition, the contractor, like any petitioner, must establish the requisite “employer-employee relationship” with the H-1B beneficiary.