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Matter of G- Inc.: Clarifying the Role of the Function Manager Under the L-1 Visa

By: Cyrus D. Mehta and Sophia Genovese

The Administrative Appeals Office (AAO) recently adopted a decision, Matter of G- Inc., Adopted Decision 2017-05 (AAO Nov. 8, 2017), providing important guidance to U.S. employers who transfer function managers under the L-1 intracompany visa. The L-1 visa allows a U.S. employer to transfer an executive or manager (L-1A) or a worker with specialized knowledge (L-1B) from a foreign subsidiary or affiliate.

As corporate structures are changing from hierarchical to flat in a globally interdependent world, the role of the function manager, who manages a function rather than people, has become increasingly relevant under L-A visa classification. A flat organization has few or no levels of management between management and staff level employees. The flat organization supervises employees less while promoting their increased involvement in the decision-making process. Building upon momentum gained from its decision in Matter of Z-A-, Adopted Decision 2016-02 (AAO Apr. 14, 2016), the AAO in Matter of G- held that:

(1) To support a claim that a beneficiary will manage an essential function, the petitioner must establish that the function is a clearly defined activity and is core to the organization.

(2) Once the petitioner demonstrates the essential function, it must establish that the beneficiary’s position meets all criteria for “managerial capacity” as defined in 101(a)(44)(A) of the Act. Specifically, it must show that the beneficiary will: primarily manage, as opposed to perform, the function; act at a senior level within the organizational hierarchy or with respect to the function managed; and exercise discretion over the function’s day-to-day operations.

Under its prior decision in Matter of Z-A-, the AAO held that an L-1A intra-company manager who primarily manages an essential function can also be supported by personnel outside the United States within an international organization who perform the day to day administrative and operational duties. This is possible in the internet age where communications can take place online and through Skype rather than face to face in a physical location. The foreign national manager seeking an L-1A visa extension in Matter of Z-A-, was the President and Chief Operating Officer of the U.S. Petitioner whose parent company was in Japan. The USCIS Service Center denied on the ground that only a small number of employees who worked in the U.S. would support the manager and relieve him from performing the duties of the function. The key issue on appeal was whether the Petitioner established that this manager would be employed in a qualifying “managerial capacity” pursuant to INA § 101(a)(44)(A). The AAO reversed the Service Center’s decision, noting that the Beneficiary would continue to rely on the support of eight staff abroad and two in the U.S. to relieve him of day-to-day operational and administrative activities. The AAO stated that despite the fact that the Beneficiary “may be required to perform some operational or administrative tasks from time to time, the Petitioner established by a preponderance of evidence that the Beneficiary will primarily manage an essential function, while day-to-day, non-managerial tasks will be performed by a combined staff of 10 employees of the Petitioner and its parent company, located in the United States and Japan, respectively.” Matter of Z-A-, at 7.

In its most recent decision in Matter of G-, the AAO further elaborates upon the contours of the “function manger.” Although Matter of G- was decided within the context of INA § 203(b)(1)(C) (where a U.S. employer can petition to permanently transfer a qualified foreign employee to the United States to work in an executive or managerial capacity), the AAO stated in its decision that the function manager analysis equally applies to L-1A function managers. Matter of G-, at 2, note 6.

The foreign manager seeking immigrant classification under INA § 203(b)(1)(C) in Matter of G- was the Director, Financial Planning and Analysis (FP&A) at a large multinational technology corporation. The company first transferred the Beneficiary to the U.S. on an L-1A visa to seek business opportunities and foster growth of the company in the U.S. markets. After a few years of success, the company decided to petition for the worker to permanently reside in the U.S. under INA § 203(b)(1)(C). The Petitioner explained in their I-140 petition that the Beneficiary would continue to direct and develop revenue forecasts and analysis for the entire company, lead mergers and acquisitions, and oversee strategic pricing analyses, among other managerial duties. However, the USCIS denied the Form I-140, finding that the Petitioner did not establish that the Beneficiary would be employed in a managerial role. It is not unusual for one Service Center of the USCIS to approve the L-1A visa and another Service Center to deny the I-140 petition.  Upon review, the AAO reversed, and sought to clarify the role of a function manager.

INA § 101(a)(44)(A) defines “managerial capacity” as:

[A]n assignment within an organization in which the employee primarily-

(i) manages the organization, or a department, subdivision, function, or component of the organization;

(ii) supervises and controls the work of other supervisory, professional, or managerial employees, or manages an essential function within the organization, or a department or subdivision of the organization;

(iii) if another employee or other employees are directly supervised, has the authority to hire and fire or recommend those as well as other personnel actions (such as promotion and leave authorization) or, if no other employee is directly supervised, functions at a senior level within the organizational hierarchy or with respect to the function managed; and

(iv) exercises discretion over the day- to-day operations of the activity or function for which the employee has authority. A first-line supervisor is not considered to be acting in a managerial capacity merely by virtue of the supervisor’s supervisory duties unless the employees supervised are professional.

(emphasis added).

In its decision, the AAO noted that “essential function” is not defined anywhere in the INA. Instead, it relied on the Merriam-Webster Dictionary definitions of “essential” and “function” in proceeding with their analysis, concluding that an essential function must be a core activity of a petitioning organization. Relying on these definition, the AAO first found that the Petitioner must “(1) describe with specificity the activity to be manage, and (2) establish that the function is core to the organization.” Matter of G-, at 3. The AAO further recognized that an organization could have more than one core activity “such as the manufacture or provision of an end product or service, and research and development into other products or services.” Matter of G-, at 3, note 11.

Once the Petitioner can establish this essential function, it must then prove that the Beneficiary meets all of the four criteria of “managerial capacity” under INA § 101(a)(44)(A). The AAO held that in addition to defining with particularity the activity to be managed and establishing that it is a core function of the organization, the Petitioner must also show that the Beneficiary will primarily manage (and not perform) the function, that the Beneficiary will hold a senior level at the organization or with respect to the function managed, and that the Beneficiary will exercise discretion with the function’s daily operations. Matter of G-, at 4.

In applying their new function manager analysis to the case at bar, the AAO found that the FP&A Director was clearly a function manager under INA §101(a)(44)(A). First, it found that “financial planning and analysis” qualified as a function within the organization as it was clearly defined with specificity and indicated a clear goal of generating data to assess the company’s revenue. Second, the AAO found that the FP&A function was essential to the company, where the Beneficiary’s work would be relied upon by the company’s executives and board of directors in making strategic decisions in mergers and acquisitions. Third, the AAO found that the Beneficiary would primarily manage the function where he would “develop and direct revenue forecasts and analysis for the worldwide organization, lead mergers and acquisitions, and oversee strategic pricing analysis.” Matter of G-, at 5. The AAO continues that the Beneficiary will be supported by six direct and three indirect reports who will “perform the routine duties associated with the FP&A function.” Id. Critically, the AAO finds that even though the Beneficiary directly supervises some of his subordinates, he still primarily manages the function. Fourthly, the AAO found that the Beneficiary will act at a senior level within the organization and with respect to the function, where he reported only to the CFO and CEO and worked closely with other senior executives and managers. Finally, the AAO found that the Petitioner clearly established that the Beneficiary will have discretionary authority over day-to-day operations where the Beneficiary will establish policies, goals, and oversee mergers and acquisitions.

Matter of G- helps to further define the contours of the function manager, and can be used as a guide to U.S. petitioners seeking to establish that the foreign worker meets the criteria under INA § 101(a)(44)(A). While Matter of G- involved a function manager, the AAO’s interpretation of what constitutes a function within an organization could arguably also be deployed to executives under INA 101(a)(44)(B) who can qualify for an L-1A visa by directing a “major component or function of the organization.”  The Petitioner in the instant matter was a large multinational corporation with over 8000 employees worldwide. The USCIS has historically been less receptive to function manager claims of smaller corporations. It may be more challenging for a smaller entity to establish that a function is a clearly defined activity and is core to the organization as well as to demonstrate that the manager is performing at a senior level. Still, petitioners should not fear making the argument that function managers of smaller corporations also meet the criteria. In Brazil Quality Stones, Inc. v. Chertoff, 531 F.3d 1063 (9th Cir. 2008), the Ninth Circuit Court of Appeals found that although size is a relevant factor in assessing whether a company’s operations are substantial enough to support a manager, “an organization’s small size, standing alone, cannot support a finding that its employee is not acting in a managerial capacity.” See also INA § 101(a)(44)(C) (“[i]f staffing levels are used as a factor in determining whether an individual is acting in a managerial or executive capacity, the Attorney General shall take into account the reasonable needs of the organization, component, or function in light of the overall purpose and stage of development of the organization, component, or function.”). Notwithstanding this acknowledgement, the Ninth Circuit in Brazil Quality Stones affirmed the USCIS’s denial of the L-1A petition by agreeing that the petitioner did not meet its burden in primarily managing the essential function rather than performing the day to day duties, and the small size of the entity probably undermined the manager’s ability to meet this burden. Subsequent to Brazil Quality Stones, though, the AAO issued Matter of Z-A- as an adopted decision, which has also been acknowledged in Matter of G-. It is now possible to demonstrate that the function manager is being supported by personnel in the foreign organization who perform the duties of the function, and this could be particularly helpful in a small organization with few staff in the U.S. The AAO took pains to note that INA 101(a)(44)(A)(iii) is worded in the disjunctive, requiring a function manager to occupy “a senior level within the organizational hierarchy or with respect to the function managed.” Matter of G-, at 6, note 15.  In a small organization, the function manager may establish seniority with respect to the function managed rather than within the organizational hierarchy. So long as petitioners clearly define the function, establish that the function is essential to the organization, explain how the beneficiary will primarily manage this function at either a senior level at the organization or with respect to the function managed, and that the beneficiary will act with wide discretion, the L-1A petition could stand a chance of being approved under Matter of G-.

Despite the economic benefits that accrue in fostering global corporate activities, the L-1 visa has been heavily criticized over the past few years, with opponents arguing that it threatens domestic employment and “floods the U.S with cheap foreign workers.” The Trump Administration has taken aim at the L-1 visa and has begun to publicly release data about companies who utilize the L-1 visa, increase site visits to companies that employ foreign workers, and has rescinded guidance instructing USCIS officers to give deference to previously approved petitions upon renewal.  Under President Trump’s Buy American and Hire American Executive Order, there is an emphasis on hiring American workers over foreign workers and for corporations to have their operations in America. But the reality is quite the opposite.  U.S. businesses can thrive, compete, prosper, create new jobs and benefit the American consumer through international operations, made that much easier with rapidly evolving internet technology and innovative organizational structures. It is thus refreshing that the AAO has recognized this reality by adopting Matter of G- and Matter of Z-A-. An adopted decision establishes policy guidance that applies to and binds all USCIS employees. USCIS personnel are directed to follow the reasoning in this decision in similar cases.

Stop the Assault on Employment Immigration to the USA

At the behest of Senator Grassley (R-IA), the DHS Office of Inspector General recently issue a controversial report, The Effects of USCIS Adjudication Procedures and Policies on Fraud Detection by Immigration Service Officers. I wonder about the intentions of Senator Grassley who put a hold on the Fairness For High Skilled Immigrants Act, which passed the Republican controlled House of Representatives by a landslide on November 29, 2011. More recently, Senator Grassley also put a hold on the Startup Visa Act, which has also received bipartisan support. Is he truly concerned about the integrity of the system or is there a deeper hidden agenda. Mind you, he has also been a foe of immigration from India with his recent opposition to the use of the H-1B and B-1 visas by Indian IT professionals. It is amazing how one Senator, who has only one vote among 100 Senators, can have so much influence over immigration policy. It is time to speak out.The report stems from a pet concern of Senator Grassley, as expressed by Judiciary Committee Chairman Lamar Smith in a February 15, 2012 hearing  before the House Subcommittee on Immigration, about whether “senior [USCIS] leaders are putting pressure on employees to approve more visa applications, even if the applications might be fraudulent or the applicant is ineligible.”

The Inspector General interviewed 147 managers and staff, received 256 responses to an online survey, and reviewed USCIS policies related to the effort to detect benefit fraud. The report was based on testimonials, not empirical data. The report recommended process improvements, such as instituting more training and collaboration to improve the fraud referral process; developing additional quality assurance or supervisory review procedures to strengthen identification of names and aliases of those seeking an immigration benefit; performing nationwide onsite outreach efforts to discuss the performance management system with Immigration Service Officers (ISOs); developing standards to permit more time for an ISO’s review of case files; revising policy on requests for evidence (RFEs) to clarify the role that the requests play in the adjudication process; and developing a policy to “establish limitations for [USCIS] managers and attorneys when they intervene in the adjudication of specific cases.” The report stated that “special treatment of complainants fosters a sense among ISOs that USCIS inappropriately grants benefits in certain cases.”

The report noted that “[t]here may be a basis for clarifying adjudication policy for O visa petitions. A low approval rate is not one of them.” The Inspector General found that O visa petitions are granted at a high rate. “Quality assurance information we examined demonstrates that excessive O visa approvals are more likely than denials.” The report stated, “From January 2008 through March 2011, the California and Vermont service centers approved 40,719 of 44,386 O visa petitions (91.7%). This approval rate exceeds the approval rate for many other nonimmigrant worker petitions. During the same time period, the two centers approved 78.5% of H-1B (specialty occupations) and 76.1% of L-1B (specialized knowledge worker) petitions.”

The Inspector General’s report noted, however, that: (1) the testimonial evidence shared by interviewees may not represent views shared by other employees; (2) USCIS has taken action to diminish threats to the immigration benefits system; (3) general employee concerns about the impact of production pressure in the quality of ISO decisions “do not mean that systemic problems compromise the ability of USCIS to detect fraud and security threats; (4) “[n]o ISOs presented us with cases where benefits were granted to those who pose terrorist or national security threats”; and (5) “[e]ven those employees who criticized management expressed confidence that USCIS would never compromise national security on a given case.”

The report concluded, however, that “[e]ven with the additional security checks and process improvements USCIS has made in the past several years, national security and fraud concerns may require more thorough review of immigration applications and petitions.” The OIG noted that “[a]dditional documentation, or further insight gained through more interview questions, would ensure that ISOs have greater confidence before making a decision.” Also, the report suggests that “Congress may wish to raise the standard of proof for some or all USCIS benefit issuance decisions.”

As an immigration practitioner, the Inspector General’s conclusions about applications being granted  too easily have no bearing with reality.  A filing of an H-1B or L petition, especially in certain industries such as IT consulting, results in a lengthy and detailed RFE asking for every aspect of the job duties, elaborate itineraries and unrealistic work schedules (such as the percentage of time performing each duty)  and other unnecessarily and trivial information about the employer and the employment. This is true even if the USCIS has been approving an H-1B petition previously on the exact facts for the very same worker who must be now be on his 10th year in H-1B status. Also, in the case of an H-1B worker in an IT consulting company who is placed at a third party client, the employer has to repeatedly demonstrate that it has a right of control  under the Neufeld Memo over this worker’s employment even if the employer demonstrated this in great detail when it last filed a request for an H-1B extension.

Senator Grassley, I ask you to put yourself in the shoes of this H-1B worker who has an approved I-140 immigrant visa petition for the green card, but is still waiting endlessly for it, along with his family, only because of the long waits in the EB-2 or EB-3 for India. If you did not put a hold on the Fairness for High Skilled Immigrants Act, this H-1B worker may have received a green card by now or close to receiving one. He now needs to wait nervously each year for an approval, with the fear that the H-1B may be denied this time around even though it got approved under the same facts the year before and the year before that. If the H-1B gets denied this time under some arbitrarily invented heightened scrutiny standard,  he and his family will fall out of status and will have to most likely need to leave the US after working in the US legally for 10 years, paying taxes and otherwise contributing to the productivity of his employer and clients. He will also be forced to yank his brilliant children out of school disrupting their lives and causing great turmoil in their young  impressionable minds.

If the OIG report becomes USCIS policy, it will kill and stifle a US employer’s ability to bring in skilled foreign national workers on H-1B, L-1 and O-1 visas. Despite Senator Grassley placing a hold on the Startup Visa Act, the DHS in August 2011 announced initiatives for entrepreneurs who founded their own startups to be able to have the company file for an H-1B visa on their behalf. This initiative too will get killed because if the government wants to look for fraud for the sake of satisfying certain statistical requirements, it will find it by shifting the goal posts. Look how many times over the past 10 years the USCIS has redefined what it means by the US equivalent of an Indian bachelor’s degree or equivalent education, thus blowing apart I-140 petitions approved after the employer meticulously but unsuccessfully tested the US labor market. Or look how the Neufeld Memo has been aimed against a very successful business model that has served the needs of Fortune 500 US corporations. If we see stricter adjudications, the US will be deprived of the talents and vision of foreign entrepreneurs who have a burning desire to set up startups in the US even in the absence of the Startup Visa Act, which have the potential to do brilliantly well like Google, E-bay or Yahoo.

At the February 15, 2012 Congressional hearing, the testimony of Bo Cooper, former General Counsel of the Immigration and Naturalization Service, is worth noting. Summaries of other witnesses at this Congressional hearing can be found in our forthcoming March 2012 Immigration Update.  Mr. Cooper said that USCIS has released official data since the report came out. He noted that recent analysis shows that the data refute concerns “that USCIS may be institutionally biased toward unjustified approvals and that the agency observes policies that would suppress RFE issuance.” The data tell the opposite story, he said: “Particularly with respect to the key nonimmigrant categories for foreign professionals, denial rates and RFE rates have risen very sharply in recent years.”

The “most startling example,” Mr.Cooper said, appears in the L-1 program, which is used by multinational corporations to transfer managers, executives, and specialists into the United States. Noting that such visas “are an essential component of a huge range of productive economic activity in this country,” he said that L-1 visas are critical to attracting foreign investment that supports the creation of jobs for U.S. workers and are critical when U.S. companies acquire companies based oversees and need to have the acquired company’s specialists come to the United States to integrate their expertise and processes. L-1 visas are also critical to companies who need to bring specialists from their overseas affiliates into their research centers and operations in the United States, he noted. “Without predictable, reliable access to these visas, employers find themselves having to move jobs and projects to other countries.”

The data for employees with specialized knowledge in the L-1B program “shows a steep rise in denials and requests for evidence beginning in 2008,” he said, noting that the denial rate for L-1B petitions more than tripled in 2008 and is now at nearly quadruple the pre-2008 rate, at 27 percent in 2011. The RFE rate change is even starker, he said. From 2005 to 2011, the rate soared from 9 percent to 63 percent of L-1B cases.

He also noted that in the L-1A program for managers and executives being transferred within multinational corporations, the RFE rate rose from 10 percent in 2005 to 51 percent in 2011. Denial rates rose 75 percent over five years, from 8 percent in 2007 to 14 percent in 2011. In the H-1B program for professionals in specialty occupations, the denial rate increased from 11 percent in 2007 to 17 percent in 2011. Over a quarter of all H-1B filings generated an RFE in 2011.

Seen in the light of this data, Mr. Cooper said “there is no basis for the concern expressed in the OIG report that USCIS has an institutional bias in favor of approvals or against RFEs.” In fact, he said, the data show the opposite trend. Noting that USCIS said in its response to the OIG report that it is reviewing its RFE policy and aims to issue new RFE guidance this year, Mr. Cooper recommended that the new policy reflect “the needs of today’s business environment and the innovation economy,” and that it be monitored carefully once put into practice.

Finally, the Inspector General’s report asks that the standard for adjudicating visa petitions be raised from the “preponderance of evidence standard” to something higher, such as the “clear and convincing evidence” standard or the even higher standard used in criminal proceedings, which is “beyond a reasonable doubt.” Under the preponderance of evidence standard, applicants have to demonstrate that the facts in their case are slightly more true than not true. Even though the preponderance of evidence standard requires a lesser degree of proof than the clear and convincing standard, this does not mean that it provides an invitation for fraud. The preponderance of evidence is the common standard used in civil proceedings, and allows the USCIS examiner to fairly evaluate very nebulous criteria while giving the benefit of doubt to the application, for instance, whether an O-1 visa applicant is extraordinary or not or whether an L-1B worker has specialized knowledge. If the applicant provided patently fraudulent documentation, he or she can be charged with the fraud ground of inadmissibility under INA § 212(a)(c)(6) and there also exist tough criminal sanctions.  In any event, it does not seem that the USCIS is faithfully adhering to the preponderance of evidence standard even today, and officially raising the bar will surely serve as an invitation for USCIS officials to arbitrarily deny even more case without fairly weighing the evidence. This would further undermine the ability of US employers to use our employment-based immigration system in an effective and rational manner to benefit them and simultaneously make the US prosper.