Tag Archive for: L-1A

Cyrus Mehta

L-1 Eligibility Without Traditional Employment: Pozzoli, Tessel, and Historic INS Guidance

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By Cyrus D Mehta and Damira Zhanatova*

For many multinational employees, founders and senior executives, especially outside the United States, “employment” is not always a simple paycheck and payroll relationship. They may be compensated through their own entities, hold significant equity, or even draw no traditional salary. Yet U.S. immigration law still requires that an L-1 beneficiary have been “employed” abroad by a qualifying organization for at least one year. 

Over decades, legacy INS and USCIS have answered what “employment” means in the L-1 context in a consistent way: the focus is on the underlying relationship of control and corporate integration, not on formalities like which entity runs payroll, what the local contract is called, or whether the individual receives a conventional salary. Classic decisions such as Matter of Pozzoli, 14 I&N Dec. 569 (Reg. Comm. 1974), and Matter of Tessel, Inc., 17 I&N Dec. 631 (Act. Assoc. Comm. 1981), along with later policy guidance, frame “employment” as the rendering of services under the employer’s power to direct and control, within a genuine corporate structure.

To qualify for L-1 classification under section 101(a)(15)(L) of the Immigration and Nationality Act (INA), a foreign national must have been employed abroad continuously for at least one year in the three years preceding the petition and admission, must have been so employed by a qualifying organization (the same employer or its parent, subsidiary, or affiliate), and must be coming to the United States to work for that organization in either an executive or managerial capacity (L-1A) or in a position involving specialized knowledge (L-1B). Neither the statute nor the regulations provide a bespoke L-1 definition of “employment.” Instead, INS and USCIS have articulated that concept through case law and policy, repeatedly emphasizing who has the power of control over the individual’s work, how integrated the individual is into the organization’s management and operations or its specialized functions, and whether the services are rendered within a bona fide multinational corporate structure.

In Matter of Pozzoli, a U.S. corporation petitioned for a long‑term executive of its Italian subsidiary to come to the United States as an L‑1. The company made clear that during his U.S. assignment, the beneficiary would remain on the Italian subsidiary’s payroll. The district director denied the petition, reasoning that because the Italian affiliate would continue to pay him, he would still be “employed” by the foreign company abroad and not “rendering his services” to the U.S. entity. On certification, the Regional Commissioner reversed. After reviewing the statutory history of section 101(a)(15)(L) and general master‑servant law, INS concluded that the district director’s focus on payroll source was misplaced. The Commissioner found that the petitioner and its Italian subsidiary were part of the same multinational enterprise, that the transfer was “to continue his employment as an executive of the corporation,” and that the purpose of the L‑1 amendments was to facilitate exactly this sort of movement of key personnel. The decision explicitly held that “the question of where the beneficiary’s paycheck may originate is not a relevant factor” in determining eligibility for L‑1 classification, and that payment by the foreign affiliate “does not preclude him from establishing eligibility.” In other words, for L‑1A purposes, the source of salary from a qualified affiliate abroad or from the U.S. entity does not, by itself, decide whether the person is “employed” by a qualifying organization; what matters is the corporate relationship and who actually controls the work.

Matter of Tessel, Inc. dealt with a different but closely related issue: can a person be treated as an “employee” when he is essentially an owner executive and does not draw a traditional salary? Tessel arose in the context of Schedule A, Group IV labor certification, but the analysis was explicitly tied to the L-1 definition of “affiliate” and the nature of qualifying employment abroad.

In Tessel, the beneficiary owned the vast majority of a South African company, served as its unsalaried chairman, and also owned a majority of the U.S. petitioner. The district director and the Regional Commissioner both questioned whether he was truly an employee at all, characterizing him instead as an investor or entrepreneur, and expressing doubt that an employer employee relationship could exist where the petitioner and beneficiary were “one and the same.” The Commissioner rejected those views, relying in part on Matter of M, 8 I&N Dec. 24 (BIA; A.G. 1958), which held that a corporation could file a preference petition for its sole shareholder.

Tessel reaffirmed that a corporation is a separate legal entity from its stockholders and is capable of employing them and petitioning on their behalf. It held that an unsalaried appointed chairman is nonetheless an employee in a managerial or executive position for purposes of Schedule A, Group IV, and that the fact that someone may qualify in another immigrant classification (such as investor) does not preclude simultaneous qualification as an employee. The decision also clarified that companies can be “affiliated” for L-1 purposes where there is a high degree of common ownership and management, either directly or through a third entity. Taken together, Tessel makes two core points that carry directly into the L-1 context: equity ownership does not destroy an employment relationship, and the absence of a conventional salary does not, by itself, mean there is no executive or managerial “employment.”

In 1995, INS distilled these themes in a policy letter that explicitly addressed the meaning of “employed” for L‑1 purposes. In a letter dated August 25, 1995, attorney William Z. Reich wrote to INS about a Canadian citizen who had been refused L‑1 admission under NAFTA because he could not produce a T‑4 wage form, the Canadian equivalent of a W‑2. The individual had been compensated under a contract that was more advantageous for tax purposes, rather than as a salaried employee, and therefore did not have the usual wage documentation. Nonetheless, a letter from the employer’s human resources manager confirmed several years of permanent, full‑time employment; he had no other job; he devoted his full attention to managing the business; and he received direction and assignments from the company’s executives, remaining subject to their control at all times. Mr. Reich argued that, given the nature and character of the relationship, the individual was clearly not an “independent contractor” as defined in the regulations, but rather an employee in substance. In her December 18, 1995 response, Yvonne M. LaFleur, then Chief of the Nonimmigrant Branch at INS, acknowledged that a general regulatory definition of “employment” elsewhere in the rules specifies compensation as one element, but explained that for L-1 purposes the Service “generally equates the rendering of service with employment for the qualifying L-1 period.” The letter cites both Tessel and Pozzoli, emphasizing that a non-salaried chairman can qualify as an L-1 nonimmigrant, and that the “power of control over the employee’s activity, rather than salary, is the essential element in the employment relationship.” That is a direct echo of the master servant analysis cited in Pozzoli: the truly “essential element” is the right to control how, when, and for whose benefit the work is performed, with the power to appoint and dismiss as strong evidence of that relationship, and the payment of wages “the least important factor”. This correspondence is reproduced at 73 Interpreter Releases 49 (Jan. 10, 1996).

Taken together, Pozzoli, Tessel, and the LaFleur letter all point in the same direction. For L-1 purposes, “employment” is primarily a question of whether the individual renders services under the direction and control of a qualifying organization. The existence of salary, the exact form of compensation, and the source of payroll are secondary considerations. Ownership, even majority or sole ownership, does not prevent a corporation from being the individual’s employer if the corporate entity is real and exercises governance authority over the executive role. Formal gaps in local payroll documentation, such as the absence of a T-4 or W-2, do not, by themselves, negate a qualifying employment relationship when the factual record shows full time, controlled service to the company.

These long-standing principles are increasingly important as global employers use local structures that do not resemble a U.S. W-2 job. Brazil provides a good illustration. In Brazil, the traditional employment relationship is governed by the Consolidation of Labor Laws (Consolidação das Leis do Trabalho, or CLT), Decree‑Law No. 5,452/1943. A CLT relationship is the classic labor‑law employment bond that brings with it a bundle of statutory wage protections, benefits, and social charges. In addition to this traditional CLT employment, however, Brazilian law recognizes several other legitimate forms for structuring professional activities. These include corporate relationships, specialized service arrangements, and the exercise of executive functions formalized through civil or commercial contracts. Under the widely used “Pessoa Jurídica” (PJ) model, for example, a professional provides services through a legal entity that he or she owns. That entity invoices the company, and compensation flows through the PJ rather than directly through a CLT employment contract. PJ contracts typically include boilerplate clauses disavowing a CLT “employment bond” or “subordination” and assigning labor and social security obligations to the PJ entity. These clauses are designed to allocate responsibilities under Brazilian labor and tax law and to make clear that the relationship is not governed by CLT, but they do not automatically mean that the individual is economically independent from, or external to, the company’s internal management.

In some L‑1A scenarios, a Brazilian‑based executive may, for more than a year within the three‑year lookback period, serve as the top‑level executive of a foreign parent company while being compensated, consistent with local practice, through a wholly owned PJ, rather than under a CLT bond. On the surface, standard PJ contract language disavowing a CLT bond or “subordination” can make the relationship look like independent contractor work, even when, in substance, the executive functions as an internal leader of the foreign enterprise. 

Under long-standing INS/USCIS guidance, the proper way to analyze such a structure is not to stop at the contract label, but to examine the underlying master-servant relationship. Corporate documents, shareholder resolutions, and other evidence can show that the foreign parent has in fact selected and engaged the individual as its principal executive; defined that person’s duties and strategic objectives; approved and adjusted compensation; retained the power, through corporate bodies, to appoint, supervise, and remove the executive; and relied on full-time, exclusive service integrated into its governance and reporting structure. A legal opinion from Brazilian counsel can further explain that the PJ form and CLT disclaimers reflect a choice among different lawful modes of engagement under Brazilian law, and do not necessarily mean that the individual operates as an external, multi-client contractor. In many such cases, the PJ itself has no other clients and functions solely as a billing and tax vehicle for executive services rendered inside the parent’s corporate structure.

Viewed through the framework of Matter of Pozzoli, Matter of Tessel, and the LaFleur letter, the legal analysis is straightforward. As Pozzoli makes clear, the origin or routing of the paycheck does not determine who “employs” the executive for L-1A purposes; what matters is which qualifying organization actually directs and benefits from the work. Tessel confirms that equity ownership and the absence of a traditional, local-law salary do not prevent a corporation from being the individual’s employer, because the corporation is a separate legal person capable of employing its owners when it exercises genuine governance authority over their roles. And consistent with the LaFleur letter, the fact that compensation is paid under a contract for tax reasons does not disqualify the arrangement, because the Service “generally equates the rendering of service with employment for the qualifying L-1 period” when the master-servant control relationship is clearly documented.

These Brazilian-style PJ situations are simply one illustration of a broader rule. For L-1 purposes, “employment” is not a rigid label tied to local labor codes, salary forms, or who prints the paycheck. Even in the U.S., the use of a Professional Employer Organization (PEO) is prevalent so that companies can access better benefits. A PEO is a firm that provides comprehensive HR outsourcing services to small and medium-sized businesses through a co-employment agreement where the employee is put on the payroll of the PEO.  The PEO can obtain better insurance premiums because it would have more bargaining power than a single company.   It is a functional concept anchored in control and corporate integration, rather than in any single compensation form or local labor‑law label. Whether the petition is for an L‑1A executive or manager or an L‑1B specialized knowledge employee, the core question is the same: has the foreign national, in fact, rendered services abroad for at least one continuous year within the required three‑year window to a qualifying organization that directed and controlled the work within a genuine multinational structure?

In jurisdictions like Brazil, where CLT employment is only one of several legitimate ways to structure professional activities and where executives or specialists often serve under PJ or other civil/commercial arrangements, what matters for L‑1 is not whether the relationship is labeled CLT, PJ, contractor, or something else, but whether the foreign entity truly functions as the employer in the master‑servant sense: selecting the individual, defining duties and objectives, supervising performance, and retaining the power to remove the person from the role. If those elements are present, and all other statutory and regulatory criteria are met, the absence of a CLT bond, a traditional salary, or a familiar payroll form should not, by itself, defeat the one‑year foreign employment requirement for L‑1 category.

[We are grateful to our late friend and colleague, William Reich, who was never afraid to push the envelope on behalf of his clients in seeking fair and favorable interpretations from the government.]

 

* Damira Zhanatova is an Associate at Cyrus D. Mehta & Partners PLLC.

 

Cyrus Mehta

Making the Case of the Manager under the L-1A Visa Whose Subordinates are AI Bots

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When the Administrative Appeals Office (AAO) designated Matter of Z-A- Inc. as an “Adopted Decision” in 2016 it was seen as a breakthrough as it recognized that a US company can rely on its resources outside the United States to produce products or provide services. Matter of Z-A-, Inc. held that an L-1A intracompany manager who primarily manages an essential function can be supported by personnel outside the United States within an international organization and also recognizing that such support was possible with the advent of internet technologies. A USCIS officer could no longer deny L-1A classification to such a manager because they were not supported by personnel within the United States.

Generative AI -data-trained technology that uses prompts to create content—has seen a massive uptick in adoption since the introduction of ChatGPT on November 30, 2002. As AI enabled chatbots can perform both complex and routine tasks within an organization, a credible case can be made that an L-1A manager may be supported by chat bots to manage an essential function within an organization rather than by humans. A recent estimate by Goldman Sachs found that generative AI could eventually automate activities that amount to the equivalent of some 300 million full-time jobs globally — many of these in office roles like administrators and middle managers.

The noncitizen manager seeking an L-1A visa extension in Matter of Z-A-, Inc. was the President and Chief Operating Officer of the US petitioning entity whose parent company was in Japan. His duties included: directing and managing the Petitioner’s financial, legal, trade, administrative, and sales activities; establishing financial and budgetary plans and goals; reviewing and monitoring sales activities performed by the Petitioner’s sales manager; liaising with the parent company; and interacting with customers and outside service providers. The Petitioner in the US only employed a sales manager and an administrative specialist. However, eight staff members within the parent company’s headquarters in Japan also exclusively supported the work of this manager.

The key issue  in Matter of Z-A-, Inc. is whether the Petitioner established that this manager would be employed in a qualifying “managerial capacity” pursuant to INA 101(a)(44)(A). The Petitioner asserted that this manager would manage an essential function of the organization, which is permitted under the statute, as opposed to managing other personnel. A functional manager under the L-1A visa classification must primarily manage the function as opposed to perform the essential function, and must also be senior in the organizational hierarchy. An employee who primarily performs the tasks necessary to produce a product or a service is not considered to be employed in primarily a managerial or executive capacity.

In reversing the denial of the L-1A petition in Matter of Z-A-, Inc. the  AAO stated:

Here the record shows that the Beneficiary, in his role as Vice President, will continue to rely on the support of the eight staff members in Japan and two employees in the United States to accomplish non-managerial duties, and that the purpose of his transfer is to oversee the short-term and long-term expansion of the Petitioner’s presence in what is a new market. Given the overall purpose of the organization and the organization’s stage of development, the Petitioner has established a reasonable need for a senior-level employee to manage the essential function of developing its brands and presence in the United States, notwithstanding that the Petitioner employs directly only two other employees in the United States. While the Beneficiary may be required to perform some operational or administrative tasks from time to time, the Petitioner has 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.

In a 2016 blog written shortly after Matter of Z-A-, Inc. it was observed that “[i]n a globalized world, where people are easily connected to each other by the internet, it is no longer necessary for a manager to rely on personnel in one location, namely in the United States. It is now common for teams of personnel within one organization to easily collaborate across different countries to produce a product or provide a service using cloud technology and even able to video conference on one’s smart phone through Skype or FaceTime.”

Practitioners may wish to advocate that generative AI can also enable the L-1A manager to primarily manage an essential function as opposed to primarily perform the tasks necessary to produce a product or service. In Matter of Z-A-, Inc., the AAO recognized that resources overseas could support the role of the L-1A manager. This sets the groundwork to argue that external resources, not limited to human employees, can be considered in evaluating the managerial capacity of the beneficiary. The L-1A petition can potentially include details of the organizational structure and staffing levels, showing that AI chatbots effectively supplement the limited human resources. The supporting evidence can further illustrate how AI chatbots handle routine tasks by interfacing with customers, thereby allowing the L-1A manager to focus on higher-level managerial duties. The evidence provided can further demonstrate that  AI chatbots relieve the L-1A manager from performing the routine day to day operational and administrative duties. This aligns with the requirement that the manager primarily manages an essential function rather than perform it with the help of AI technology.

Following Matter of Z-A, Inc. the AAO in  Matter of G- Inc., Adopted Decision 2017-05 (AAO Nov. 8, 2017), provided important guidance to U.S. employers who transfer function managers under the L-1 intracompany visa. 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. In Matter of G, 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 its analysis, concluding that an essential function must be a core activity of a petitioning organization. Relying on these definitions, 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.”  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.”

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 Immigration and Nationality Act (INA).

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.

 

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 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.

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.”  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.”  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.

Using the same analysis as in Matter of G,  and as set forth in the USCIS Policy Manual, a company can establish that its AI technology is an essential or core function of the organization. It can further be established that the beneficiary will primarily manage this function, and will be supported by AI bots when managing the function. This would be analogous to Matter of Z-A, Inc. which recognized the ability of foreign personnel outside the United States to support the L-1A manager in the US.  It can also be established that the L-1 manager is employed at a senior level within the organizational hierarchy and that they have discretionary authority over the day to day operations.

A Forbes article that provides examples of how brands are replacing their employees with AI technology. It provides examples of how Klarna, the Swedish-based “buy now pay later service”,was using an OpenAI powered customer service chatbot that was doing the work of 700 customer service agents faster and more efficiently than human workers. The article also notes that large financial service companies like Goldman Sachs and Morgan Stanley are introducing AI tools that can replace much of the entry level white collar work such as preparing spreadsheets, creating PowerPoints and analyzing financial data. BestBuy is replacing its geek squad agents with generative AI technology to provide customers with personalized, best in class tech support experiences. Even local governments are resorting to AI. The Texas Education Agency is rolling out a “new artificial intelligence-powered scoring system set to replace a majority of human graders in the region.” If a petitioning entity is using similar AI technology a case can be made that AI is relieving the manager from performing the day to day tasks while the manager manages the essential function. An organization that relies on bots may have a smaller number of employees, but one should push back against a negative finding only because of the small size.  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.”).

While it would be more feasible to build the L-1A case for a functional manager who is supported by AI technology, the next step in the evolution of L-1A jurisprudence would be to establish that even a people manager might qualify for this visa classification if they supervise AI chatbots rather than humans. These AI bots can take the place of other “supervisory, professional, or managerial employees” under INA 101(a)(44)(A)(ii) who are supervised and controlled by the L-1A manager. Under  INA 101(a)(44)(A)(iii) the manager must also have “the authority to hire and fire or recommend those as well as other personnel actions (such as promotion and leave authorization)” of the employees they supervise. Admittedly the L-1A manager may not have the authority to hire and fire bots or take other personnel actions as they are not employees. The manager, however, could have equivalent authority such as the ability to upgrade the AI technology or replace the bots with other bots to comply with INA 101(a)(44)(A)(ii) and 101(a)(44)(A)(iii). This may seem far fetched for now, there may come a time when the USCIS might be persuaded to approve an L-1A petition for a people manager who will be managing and supervising AI bots rather than humans.

[This blog is only for informational purposes and should not be relied upon as a substitute for legal advice.]

 

 

 

 

Cyrus Mehta

The Differing Impact of Foreign Entity Changes on an L-1 Extension and EB-1(C) Petition

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By Cyrus D. Mehta and Rebekah Kim

U.S. Citizenship and Immigration Services (USCIS) has issued a final policy memorandum designating Matter of F-M- Co. as an Adopted Administrative Appeals Office Decision. The decision clarifies that for employment-based first preference category multinational executives or managers, a petitioner must have a qualifying relationship with the beneficiary’s foreign employer at the time the petition is filed, and maintain that relationship until the petition is adjudicated. It also clarifies that if a corporate restructuring affecting the foreign entity occurs before the immigrant visa petition is filed, a petitioner may establish that the beneficiary’s qualifying foreign employer continues to exist and do business through a valid successor entity.

This differs markedly for an L-1 extension. In our prior blog, Questions Arising From Foreign Entity Changes after an L-1 Petition is Approved, we explained that an extension request can be made for an L-1 even if the foreign entity (i.e., parent, affiliate, subsidiary) that employed the foreign national on the L-1 visa has dissolved and there is no successor in interest or successor entity, so long as there is a foreign qualifying entity, even if that foreign entity is not the one that employed the beneficiary. According to 8 CFR §214.2(l)(1)(ii)(G)(2), the employer must be doing business in the U.S. and at least one other country for the duration of the employee’s stay in the U.S. as an L-1 nonimmigrant. A foreign qualifying entity, also, must be doing business the entire time the beneficiary is in L-1 status. However, it is less clear whether the foreign qualifying entity needs to be the same one that employed the L-1 while s/he was abroad. Still, an old decision of the Board of Immigration Appeals, Matter of Chartier, 16 I&N Dec. 284 (BIA 1977), provides clarity. In Matter of Chartier, the L-1 employee was employed by a company in Canada, then transferred to work for the same employer in the U.S. The Service granted, then later revoked, the foreign national employee’s L-1 status because it found that the employer did not have a subsidiary or affiliate in Canada. The Service contended that without an established foreign branch, there was no place for the alien to return to, and his L-1 employment could not be deemed temporary. The Board rejected this argument, concluding in its Interim Decision that the L-1 employee could be sent back to Canada, or to the company’s affiliate in Belgium. The Board’s decision indicates that the L-1 remained valid so long as the company had a qualifying entity abroad, even if it was not the foreign entity where the L-1 employee gained his qualifying experience. This conclusion may also be drawn from USCIS L-1 training materials, which were uncovered in response to a FOIA request, and can be found on AILA InfoNet at AILA Doc. No. 13042663 (posted April 26, 2013).

Matter of F-M-Co confirms that the analysis changes if the L-1 beneficiary is sponsored by the U.S. entity for lawful permanent residency under the employment-based first preference for multinational executives or managers pursuant to INA § 203(b)(C) under the employment-based first preference (EB-1C), and the foreign entity where the beneficiary worked no longer exists as a result of a reorganization. There is no parallel regulatory provision to 8 CFR § 214.2(l)(1)(ii)(G)(2); the analogous provision at 8 C.F.R. § 204.5(j)(3)(i)(C) provides the “prospective employer in the United States is the same employer or a subsidiary or affiliate of the firm or corporation or other legal entity by which the alien was employed overseas.” (Emphasis added.) If the foreign entity that employed the beneficiary no longer exists, it must at least exist as a successor to the prior entity under the Neufeld Memorandum of 2009, which adopted a commonsensical definition of successor over a strict reading that had previously been followed – where a valid successor relationship could only be established through the assumption of all of a predecessor entity’s rights, duties and obligations. The Neufeld Memorandum turned to Black’s Law Dictionary for definitions of “successor” and “successor-in-interest”. The 2009 edition of Black’s Law Dictionary defined a “successor” as “a corporation that, through amalgamation, consolidation or other assumption of interests is vested with the rights and duties of an earlier corporation,” and a “successor-in-interest” as “one who follows another in the ownership or control of property” and “retains the same rights as the original owner, with no change in substance.” By ruling that the qualifying entity abroad is not required to exist in the exact same legal form, and that a successor entity may be considered to be the same entity that employed the beneficiary abroad, the AAO acknowledged the reality that large organizations may undergo reorganization, and as a result, associate entities may be merged, consolidated, or dissolved.

Nevertheless, the AAO’s adopted decision in Matter of F-M- Co will unfortunately lead to differing and absurd results for a nonimmigrant L-1 extension and for a petition for permanent residency. When a beneficiary applies for extension of L-1 status after the foreign entity that employed him/her ceases to exist, the extension may be approved based on the existence of another qualifying foreign entity abroad. However, when the beneficiary is then sponsored for permanent residency, there must be a valid current relationship between the U.S. Petitioner and the foreign entity or foreign successor entity, as broadly defined in the Neufeld Memorandum, in order for the immigrant visa to be approved. If, though a merger or transfer, the foreign entity no longer meets the definition of parent, affiliate, or subsidiary, and further does not meet the definition of a successor, the petition for permanent residency will not be approved.

Cyrus Mehta

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

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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.