I respect immigration-law web-site. In the context of 7th year extension, Yates himself said that the substituted beneficiary will retain priority date of labor even if it was substited shortly before 6 years of h-1b was up for the substituted beneficiary. This would go against the counter of the interpretation of the relevant cfr.
Also, on immigration-law breaking news if you read his interpretation he said that the labor has to be substituted before the fifth year of the h-1b for the substituted beneficiary. Even though this contradicts yates and every other attorney with regards to this issue.
... I have not seen that memo from Yates. But looks like you are saying that:
1) LC was approved for employee A
2) Employer substittuted employee B for A
3) Employee B is eligible for 7th year extension.
Correct me if I am wrong?
If uscis used the priority date of 140 for substituted beneficiary then it would have far reaching impacts. Simply because in the ability to pay cfr it has to be met from priority date. If you could reset priority date then that cfr would only require ability to pay from 140 date and no one would get denied. Put it this way, if you had two people who filed labor from the same company and priority date of their labors was 2001 but 2001, 2002, 2003 company financials couldn't overcome ability to pay then all the company would have to do is to substitute both employees with each others labor, reset priority date to date of 140 and then start paying proferred wage on that date and they would get approved.
... I won't correlate "ability to pay" with PD. Burden to prove "ability to pay" from the day LC was filled falls on employer. Employer is attesting to the fact that no qualified US worker is available and willing to take the offered position. Employer needs to show ability irrespective of substitution or not.