Tag Archive for: H-1B Visas for Entrepreneurs and Owners

Cyrus Mehta

THE BLOCKING OF AN ENTREPRENEUR: A BROKEN IMMIGRATION SYSTEM AT WORK

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3D printing technology is about to revolutionize the way we understand manufacturing, and the country that takes the lead in this new technology will be the winner ofwhat The Economist magazine has called the third industrial revolution. A state of the art hearing aid or a high tech component for a military jet can be designed through a computer and printed on an unattended 3D printer as a solid functioning object.

Yet, the US Customs and Border Protection on the Canadian border recently refused admission to a dual national Canadian/British entrepreneur JF Brandon who is part of a startup called D Shape – which has developed a large-scale 3D printer that will revolutionize the way architectural design is planned, and building constructions are executed. By simply pressing the “enter” key on the keypad D Shape gives the architect the possibility to make buildings directly, without intermediaries who can add interpretation and realization mistakes.

Although refused entry into the United States, Mr. Brandon participated in a panel discussion on February 13, 2012 at Brooklyn Law School in New York entitled Immigration Policy and Entrepreneurship: Challenges and Pathways for Startups. Thanks to technology that has now become so routine, he could participate through Skype from overseas, and told a riveted audience that he had been refused entry under a NAFTA TN visa to work for D Shape in New York, which is limited to certain occupational categories and applies to Canadian and Mexican citizens. For an individual who wishes to work in a business related field, the only TN occupational classification is “Management Consultant,” but the CBP official did not think Mr. Brandon would fall under this category as he would be more of a “Manager,” which is not a TN classification. Although he will try again for a TN visa, the H-1B visa category is more obvious,  which allows one to work in many more professional fields, but there are no H-1B visa numbers left for this fiscal year. If he applies for one, he will have to wait until October 1, 2013 to get in, and that too if he is lucky enough to get selected in the event that the USCIS receives more than the allotted 65,000 H-1B visas during the first week April 2013 – the first month when employers can file H-1B visas for an effective start date of October 1, 2013.  Other than the H-1B visa, there are few options for enterprising foreign entrepreneurs. The O-1 visa is limited to foreign nationals who can demonstrate extraordinary ability in their fields through sustained national or international acclaim. The L-1 visa is available to intra-company executives, managers or specialized knowledge employees who have been working for an affiliated overseas company for one year in the same capacities. The E-2 visa, applies to nationals of a few countries that have as treaty with the US (and Canada is one of them), but it requires the entrepreneur to make a substantial investment.

I was honored to be on the distinguished panel last week, along with Jeremy Robbins who is Director of the Partnership for a New American Economy and Special Advisor to Mayor Bloomberg, Michael Wildes, Partner of Wildes and Weinberg PC and Owen Davis, Venture Capitalist, Director of NYC Seed.  The moderator was Professor Jonathan Askin, who is the Director of the innovative Brooklyn Law Incubator Policy Clinic, which also sponsored the program along with New York Legal Hackers. Apart from the wonderful ambience and engaging audience –and there was jazz at the beginning and end of the program – the panelists generallypainted a grim picture of the visa options available to foreign entrepreneurs who wish to develop startups in the US. Indeed, Mr. Davis said that NYC Seed would be reluctant to fund foreign national entrepreneurs due to the inherent risks and uncertainties caused by the immigration system. Mr. Wildes described the many immigration options that exist in the US immigration system, but then qualified that it would be very difficult for an entrepreneur to take advantage of them. Under the H-1B visa program, for example, the USCIS insists on the need to show that the H-1B worker’s employment will be controlled by the employer, which will be difficult in the case of startup owned by the foreign national. This obstacle is in addition to the fact that H-1B visa numbers run out even before the start of the fiscal year. Even the E-2 visa is limited to nationals of treaty countries, according to Wildes, which does not include any of the dynamic BRIC (Brazil, Russia, India and China) countries.  I pointed out that there may be new hope, even amidst the bureaucratic “culture of no” mindset, in the USCIS’s new Entrepreneurs in Residence Initiative, where immigration officers have been trained to recognize the unique nature of startups, such as operating in stealth mode or not having an established office space. Control of employment may also be shown in other ways, through the need to maintain a separate existence between the corporation and the shareholder, as well as the possibility of minority shareholders exercising control through shareholding agreements or through their latent power to seek dissolution based on egregious conduct by the majority shareholders.  Mr. Robbins highlighted the political realities, which means that a new Startup Visa will only be enacted be when Congress rolls out a Comprehensive Immigration Reform bill.  Despite the importance of foreign entrepreneurs, and the fact that America knows best how to nurture entrepreneurship, there is little chance of a Startup Visa Act in the absence of Comprehensive Immigration Reform.

The take away from this program is that we clearly need Congress to create a Startup Visa rather than entrepreneurs using existing visas that were not designed for them, but those legislative proposals will flounder unless they are included in a Comprehensive Immigration Reform (CIR) bill.  One version of a Startup Visa would require the entrepreneur to invest a minimum of $100,000 in order to get a two year green card. To keep the green card past two years, the founder would need to create five jobs and either raise at least $500,000 in additional funding or $500,000 in revenues. Even if Congress enacted a Startup Visa, these requirements could be rather burdensome for a nimble entrepreneur who could still launch a successful business without an initial $100,000 investment. Thus, a CIR proposal can also tweak some of the existing visa categories to make it easier for founders to remain in the US as nonimmigrants and provide alternative pathways, such as by relaxing the element of control in the H-1B visa and also allowing a majority shareholder to be sponsored for a green card through the labor certification program. The well-intended guidance for entrepreneurs under existing visa categories should also be part of reform legislation rather than remain as mere guidelines that run the risk of not being followed by an immigration officer.  Otherwise, we will have initiatives like Blueseed, which envisages a ship in international waters off Silicon Valley that will serve as an incubator for foreign entrepreneurs to develop their startups without needing to get a US visa. They can visit shore briefly on a B-1 business visa for meetings, and then return to the ship to work at their startup. To add to the uniqueness of the entrepreneur and immigration program in Brooklyn, the founder of Blueseed, Dario Mutabdzija, also participated through Skype. I have a feeling that Blueseed will succeed even if we have CIR as there will always be entrepreneurs who may not be able to take advantage of onerous visa options in the early stages of the startup.

Finally, from my experience as a practitioner, I have seen that immigrants from all backgrounds can become entrepreneurs, and it is not necessary that only graduates from STEM (Science, Technology, Engineering and Math) programs will succeed with startups. A lesser educated immigrant with burning ambition, such as a cook, can one day start a restaurant chain just as a Ph.D in Engineering can develop the next generation 3D printer.  Both create more jobs – and America could also enjoy more cultural diversity through the businesses of foreign entrepreneurs.As I recently tweeted on Twitter, “We need both brilliant STEM and delectable tandoori chicken in America.” Thus, if the political reality is to include startup visa options in CIR, let’s bring it on sooner than later so that American will be able to benefit from the talents of foreign entrepreneurs of all backgrounds and stripes.

Cyrus Mehta

Do We Have a Start-Up Visa For Entrepreneurs Even When Congress Has Not Lifted a Finger?

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The US economy remains sluggish. The joblessness rate is still much too high. Even after the debt ceiling crisis was averted at the last minute, the compromise did not generate any excitement or renewed optimism. Indeed, the Dow Jones industrial average plunged more than 500 points on August 4, 2011 on fears that the US may enter into another recession.

We need something new that would give us cause for hope. How about an immigration stimulus?

On August 2, 2011, the Department of Homeland Security Secretary Napolitano Secretary Napolitano and USCIS Director Mayorkas made dramatic announcements advising that foreign entrepreneurs could take advantage of the existing non-immigrant and immigrant visa system to gain status and permanent residency. According to the DHS press release, these administrative tweaks within the existing legal framework would “fuel the nation’s economy and stimulate investment by attracting foreign entrepreneurial talent of exceptional ability.” Director Mayorkas wrote a blog acknowledging that entrepreneurs and skilled workers would “fuel our nation’s economy by creating jobs, and promoting new technologies and ideas.”

All this has happened without Congress lifting a finger. In fact, even the DHS has not done much. It has clarified the true meaning of the provisions in the Immigration and Nationality Act, which Congress itself enacted, which it had previously distorted. For example, in its prior policy memo authored by Donald Neufeld on H-1B employment relating to third party sites, the USCIS indicated that to qualify as an H-1B worker, the petitioning employer must demonstrate an employer-employee relationship. Under such circumstances, it would be practically impossible for an owner of a company to be sponsored for an H-1B if it could not demonstrate that the entity could control the employment, despite administrative decisions upholding the separate existence of the corporate entity. In the latest H-1B Question and Answers, the USCIS appears to still hold the line about the need to demonstrate an employer-employee relationship, but has conceded that this can nevertheless be demonstrated even when the owner of the company is being sponsored on an H-1B visa, so long as there is a right of control by the petitioner over the employment of the beneficiary. According to the USCIS Q&A:

For example, if the petitioner provides evidence that there is a separate Board of Directors which has the ability to hire, fire, pay, supervise or otherwise control the beneficiary, the petitioner may be able to establish an employer-employee relationship with the beneficiary.

This is indeed a welcome clarification, and is something that we also advocated in a prior article on our website, See Cora-Ann Pestaina, USCIS GRAPPLING WITH THE RIGHT OF A CORPORATION TO PETITION FOR ITS OWNER FOR AN H-1B VISA:

Also, the chance of an approval is greater if others are also involved in the management of the entity. Petitioners must endeavor to establish the power to make final decisions and to terminate the beneficiary’s employment. For example, the employer-employee relationship might be satisfactorily illustrated where petitioner’s bylaws clearly dictate how the corporation will be managed. Petitioner may be able to show, through its bylaws, that its business and property will be managed by a Board of Directors and that a majority vote of this Board will govern the employment, compensation and discharge of all employees of the corporation. A Board of no fewer than three Directors, including the beneficiary, would mean that the majority vote belonged to Directors other than the beneficiary and essentially, that petitioner held the power to make decisions for the company and to terminate the beneficiary’s employment. As a result, the employer-employee relationship is less likely to be questioned.

We hope that this policy announcement becomes a reality and that the officers in the field faithfully follow the directives. Vivek Wadhwa, noted scholar on entrepreneurship, has stated in his recent column in the Washington Post, “We could easily see thousands of start-ups generating tens of thousands of jobs in the next couple of years if these changes are enacted in the spirit that they were intended.” Indeed, unlike the legislative proposal for the Start-Up Visa (which has not made much progress in Congress), or the more onerous EB-5 Investor category that exists presently, there is no minimum investment requirement or creating a minimum number of jobs within a certain time frame. The petitioner, however, will still need to demonstrate that it will be employing the beneficiary in a specialty occupation, which is a position that requires the minimum of a bachelor’s degree in a specialized field, and that the entity will be able to provide work for the beneficiary in this specialty for the duration of the H-1B visa.

The H-1B visa has a six year limit. What happens to this entrepreneur after six years? The USCIS has clarified other existing provisions to encourage entrepreneurs. to apply for the green card. Another set of Question and Answers on the Employment-based Second Preference (EB-2) suggests that an entrepreneur can be sponsored under this immigrant visa category, which generally requires a labor certification, but can seek an exemption of the labor certification requirement through a “national interest waiver.” In addition, the beneficiary must be able to demonstrate an advanced degree (or its equivalent – bachelor’s degree + 5 years of post-baccalaureate experience) or exceptional ability. This too is nothing new. The national interest waiver was enacted by Congress in 1990, and exists under INA §203(b)(2)(B), except that it had become impossibly hard to obtain under Matter of New York State Department of Transportation, 22 I&N Dec. 215 (Comm. 1998) (NYSDOT), which set forth a three-prong test.

With respect to the first two criteria under NYSDOT, the petitioner must show that he or she will be employed “in an area of substantial intrinsic merit” and that the “proposed benefit will be national in scope.” Interesting, until this new policy, it was always difficult for an entrepreneur to show that localized employment through his or her enterprise would be national in scope. This concern has now been put to rest in the EB-2 Q&A:

For example, the entrepreneur might be able to demonstrate that the jobs his or her business enterprise will create in a discrete locality will also create (or “spin off”) related jobs in other parts of the nation. Or, as another example, the entrepreneur might be able to establish that the jobs created locally will have a positive national impact.

It is the third that is extremely opaque and difficult to overcome. The petitioner must demonstrate that “the national interest would be adversely affected if a labor certification were required for the alien. The petitioner must demonstrate that it would be contrary to the national interest to potentially deprive the prospective employer of the services of the alien by making available to U.S. workers the position sought by the alien.” The AAO went on to further illuminate this criterion as follows: “Stated another way, the petitioner, whether the U.S. employer or the alien, must establish that the alien will serve the national interest to a substantially greater degree than would an available U.S. worker having the same minimum qualifications.”

Overcoming the third prong is difficult, and allowed the USCIS to shoot down the best of arguments made by a national interest waiver claimant. Indeed, the USCIS could always resort to this subjective criterion to thwart even the most meritorious of claims, which is that the claimant does not overcome the inherent interest of the government in making the job available to US workers.

The EB-2 Q&A refreshingly provides the following golden nugget to the entrepreneur to overcome the third prong:

The entrepreneur who demonstrates that his or her business enterprise will create jobs for U.S. workers or otherwise enhance the welfare of the United States may qualify for the NIW. For example, the entrepreneur may be creating new job opportunities for U.S. workers. The creation of jobs domestically for U.S. workers may serve the national interest to a substantially greater degree than the work of others in the same field.

It would have been nice if the USCIS had thrashed the three prong test in NYSDOT, as in my opinion, INA section 203(b)(2)(B) does not set forth such a cumbersome test, and the statute, which is a clear expression of Congress, is more important than an AAO decision, which added a spin on an unambiguous statutory provision. And what if the entrepreneur cannot demonstrate that he or she is working in the national interest or cannot qualify under the EB-2 because he or she lacks an advanced degree or exceptional ability?

The EB-2 Q&A appears to suggest that the entrepreneur can also be sponsored for a green card under the EB-2 through a labor certification. Presumably, an entrepreneur under the EB-3 could also be sponsored through a labor certification. This is a surprise. The DOL has always frowned upon an owner of an entity being sponsored for a labor certification. In order to obtain labor certification, the employer must establish that it has conducted a good faith test of the labor market and that there were no qualified US workers who were available for the position. The DOL has denied labor certification to both 100% and minority owners of companies who filed a labor certification on their behalf. See ATI Consultores, 07-INA-64 (BALCA Feb. 11, 2008); M. Safra & Co. Inc., 08-INA-74 (BALCA Oct. 27, 2008). The test for determining whether an employee closely tied to the sponsoring entity could qualify for labor certification was set forth in Modular Container Systems, Inc. 89-INA-228 (BALCA July 16, 1991) (en banc), where BALCA applied a “totality of circumstances” test to determine whether there was a bona fide job offer to US workers. Modular Container Systems considers whether the foreign national:

a) Is in a position to control or influence hiring decisions regarding the job for which LC is ought;
b) Is related to the corporate directors, officers or employees;
c) Was an incorporator or founder of the company;
d) Has an ownership interest in the company;
e) Is involved in the management of the company;
f) Is on the board of directors;
g) Is one of a small number of employees;
h) Has qualifications for the job that are identical to specialized or unusual job duties and requirements stated in the application; or
i) Is so inseparable from the sponsoring employer because of his or her pervasive presence and personal attributes that the employer would be unlikely to continue without the foreign national.

Clearly, an entrepreneur who may successfully obtain an H-1B visa under the new guidance will most likely fail under the Modular Container Systems “totality of circumstances” test. Did the USCIS consult with the DOL before issuing this guidance? Will the DOL be receptive to the USCIS’s new policy of encouraging entrepreneurs and liberally interpret Modular Container Systems? When DOL implemented the new PERM labor certification program, it also promulgated 20 C.F.R. §656.17(l), which incorporates some of the Modular Container analysis, and also requires the employer to certify on the PERM labor certification application whether the foreign national has an ownership interest in the sponsoring entity or has a familial relationship with the stockholders, corporate officers, incorporators or partners. What will become of this regulation? I do not feel that the DOL will change its ways on entrepreneurs. Whether one agrees or not, the DOL believes that its narrow mission is to protect the jobs of US workers, and not to spur economic recovery and growth. Of course, one can argue that foreign entrepreneurs who are allowed to start up businesses and stay in the US will likely create jobs for US workers, rather than take the jobs of Americans, but this logic may fall on deaf ears as far as the DOL is concerned. I hope I am proved wrong on this by the DOL.

In conclusion, the new policy, if implemented, will allow foreign entrepreneurs to obtain H-1B visas, and under certain circumstances, also qualify for a “fast track” green card under the National Interest Waiver. Much administrative tinkering still needs to be done if we really want to create a system that will spur amazing economic activity. The DOL will need to fall into line. The horrendous EB-2 and EB-3 backlogs for Indian and Chinese beneficiaries will still persist. It makes no sense to encourage entrepreneurs from India and China if the wait to get a green card will be in excess of 5 years in the EB-2 or more than a decade in the EB-3. In Tyranny of Priority Dates, Gary Endelman and I offered a blueprint for further administrative action to allow beneficiaries of approved I-130 and I-140 petitions to file adjustment of status applications even if the priority date is not current as well as allow the grant of employment authorization and parole, which would include spouses and other dependants. We have also provided an administrative blueprint for DREAM kids. Our proposals are more ambitious, but I am heartened that the Executive Branch on August 2, 2011 did the right thing by recognizing that foreign national skilled workers and entrepreneurs can be an asset rather than a liability, even in such hard economic times. If the USCIS guidance is properly implemented, these skilled foreign nationals may provide much needed stimulus for the flagging and lackluster US economy.