H-1B Series: The Petitioner And Its Job Offer
The basic premise of the H-1B category is that there is (1) a "United States Employer" (2) making a bona fide, nonspeculative job offer (3) for temporary employment (4) in a qualifying occupation (5) to a qualified foreign professional.
The "United States Employer"
A "United States Employer" means
"a person, firm, corporation, contractor, or other association, or organization in the United States which:This definition offers wide latitude regarding the form of business organization that may file an H-1B petition. In a majority of cases the petitioner is a U.S. based business corporation. However, it may also be any other form of firm or association, a nonprofit organization or government agency, a partnership, or even a sole proprietorship or individual person. The common requirement is simply that the entity have a U.S. Internal Revenue Service ("IRS") tax identification number. Business organizations of all forms obtain such numbers from the IRS to prepare business tax returns. Sole proprietorships or individuals may use personal Social Security numbers if they do not qualify for a business tax identification number."(1) Engages a person to work within the United States;
A foreign business entity may, similarly, wish to file an H-1B petition and directly employ a person in the U.S. in H-1B status without going through the expense and trouble of incorporating a U.S. subsidiary corporation. Such employment is permissible under two scenarios. First, the foreign business may establish a simple "branch office" business presence in the U.S. and obtain an IRS tax identification number for the branch office. A tax or accounting professional can help with that process and provide advice as to the ramifications of then establishing a regular U.S. subsidiary corporation. Or the foreign business may authorize a U.S. "agent" to file the petition on its behalf. Among other considerations, a petition filed by a U.S. agent is subject to the condition that the agent "must guarantee the wages and other terms and conditions of employment" of the beneficiary.
The "employer-employee relationship" requirement raises questions in situations where the H-1B nonimmigrant owns a significant interest in the petitioning entity, or is one of its partners, proprietors, or founders. In today's economy, foreign professionals are often involved in founding start-up technology companies that then sponsor them for H-1B status in the U.S. In such circumstances it may appear that the employer/employee distinction between the petitioner and beneficiary is blurred. In the most extreme example, a foreign national may incorporate a company on his or her own, and be the sole founder, shareholder, officer, and employee. The putative H-1B petition could then be viewed as simply a vehicle for the foreign national to engage in self-employment.
In such cases care must be taken to examine the foreign national's role in the enterprise, and the petitioner must be prepared to explain how it retains the ability to "hire, pay, fire, supervise, or otherwise control" the work of the employee named in the petition. So long as that test can be met there is no prohibition on the foreign national beneficiary of an H-1B petition being an owner, founder, partner, or other major stakeholder. Where the foreign national is a co-founder and owner of a start-up company, for example, it is recommended that he or she hold less than a majority stock interest so that he or she is theoretically subject to the "control" of the corporate entity.
The "employer-employee relationship" requirement thus prohibits a foreign national from filing a petition as a sole proprietor on his or her own behalf, arranging for self-employment. Nevertheless, in a result that appears inconsistent with the regulatory requirement, the INS Administrative Appeals Office ("AAO") has overturned a service center's denial of an H-1B petition filed by an incorporated mathematical research firm whose sole owner and employee was the H-1B beneficiary. The decision was based on the petitioner's corporate status, holding that the "sole proprietor of a corporation" may be "employed by that corporation as the corporation has a separate legal entity from its owners." Therefore, the AAO held, a "bona fide employer-employee relationship did exist and the petitioner qualified as a U.S. employer." The decision was not designated as precedent, so it remains to be seen if the INS adopt this approach.
The Bona Fide, Nonspeculative Job Offer
The petitioner must be able to demonstrate that it is making a bona fide, nonspeculative job offer in the requested H-1B occupation. This derives from the general premise that "H-1B classification may be granted to an foreign national who . . . will perform services in a specialty occupation. . . ." The petitioner must establish to the satisfaction of the INS that if the petition is approved, the beneficiary "will" perform services in the specialty occupation position described. If despite its representations the petition only establishes, in the opinion of the INS, that at best the foreign national "may" perform such services, then it will be denied. This requirement, general in nature, tends to be a factor in several more specific concepts applied by INS in assessing the credibility and viability of the stated facts about the petitioner and the offered position and salary. The concepts do not represent express regulatory requirements in the H-1B program, but do borrow from principles that are express requirements in other immigration contexts.
First and fundamental, the employer must establish that it comprises a real, viable, fully operational business enterprise, capable of making a good-faith job offer and actually hiring the H-1B foreign national in the specialty occupation. For large companies this will not be a problem, but they must still remember to submit supporting documentation, which would generally include an annual report and a selection of promotional literature showing who or what the company is, what it does, when it was founded, and the level of annual income. Even large, well-established employers have had difficulty with the INS because they neglected to include basic supporting documentation.
For small companies or start-up enterprises, it is crucial to submit sufficient documentation to show, at a minimum, that the business has been legally established, has a business premises, and has begun full operations. This documentation would include articles of incorporation, an office lease, photographs of the office location, a detailed business/financial plan, tax returns, promotional literature or product documentation, an organizational chart, and any other evidence of business activity such as contracts or partnerships.
It is also important to demonstrate that the employer has the financial ability to pay the salary offered over the period designated on the petition, or the realistic promise of generating such resources. For large, well-established companies this is, again, something that will usually be easily proved through an annual report showing gross earnings and capitalization or a similar document. For small companies, noncorporate individual proprietorship or partnership employers, or start-up enterprises this needs careful attention. Supporting statements and documentation should be organized around two themes: (1) establishing the level of liquid resources and cash flow the petitioner has on hand at the time of filing the petition and (2) establishing the level of cash flow and income that is anticipated over the petition period. Either of these approaches may be the stronger argument. A start-up technology company in the product development phase, for example, may have a generous level of assets provided by venture capital financing, but no projected income for the foreseeable future. A start-up consulting company, however, may have limited current assets but also possess client contracts that guarantee an income stream once the company can place consultants at the client sites.
Supporting documentation to demonstrate current assets or level of resources and cash flow include financial statements, bank statements, a deed for any real property, payroll records showing the current level of payroll, tax returns, and term sheets or other documentation of angel or venture financing. Documentation of expected future income would include a business plan, projected financial statements, contracts to provide services or sell the company's products, or other evidence of the business' planned growth and revenue projections.
Note that an express "ability to pay" requirement is not part of the H-1B regulations the way it is a requirement in employment based permanent resident petitions. However, as a practical matter the Service Centers conflate "ability to pay" with the more general question of viability of the job offer, so it can be very important to present credible financial information as part of the supporting documentation. Further, it has become common in recent years that U.S. consulates overseas will strictly scrutinize the employer's financial viability and ability to pay the salary offered even if the INS had been satisfied and approved the petition. It can be a rude surprise for the beneficiary of an approved H-1B petition to be required to submit the employer's tax returns or other more extensive financial documentation at the consulate. It does happen that even after the INS has approved the H-1B petition, a consulate may refuse the H-1B visa on grounds that the employer has insufficient income or assets to show a bona fide ability to pay the wage stated in the petition.
Separate from the questions of whether the company is established and has sufficient resources to pay the worker is the question of whether it has "sufficient work" or a bona fide need for the beneficiary's services, in the specialty occupation. If it does not, the petition is viewed as offering only "speculative employment "and will be denied. The INS will raise this issue if the job is described in vague, nonspecific terms or where a company, particularly a small one, has simultaneously filed several substantially identical petitions without an explanation of the need for the overall group of H-1B workers.
This becomes a problem most often for small consulting companies who simultaneously file several H-1B petitions for workers in a foreign country. Typically, the company has not arranged client sites for the beneficiaries at the time of the petitions but plans to do so after they enter the U.S. and can meet clients face to face. This creates a Catch 22-the INS will not approve an H-1B petition if it does not appear there is sufficient work or a bona fide need for the person, but the employer cannot confirm that the person's services will be desired by a client until he or she is in the country.
It is in fact not ordinary INS policy to require the petitioner to submit specific contracts between the petitioner and proposed work site or to otherwise demonstrate that one particular client site has work for the beneficiary. However, the petitioner should be able to show from a totality of the circumstances that it has a bona fide need and ability to employ the person, and as such it will be able to place the person at a client site very soon after entry, or place the person on its own payroll without a client placement and use the person directly for in-house or similar projects. (Under all circumstances the employer will be required to place the beneficiary on its payroll within thirty days of his or her entering the country.) The employer should therefore include documentation of the nature and scope of its client base and open client project needs, and as much specific information as it can about the beneficiary's skills and how it envisions those skills meeting particular client needs or fitting into on-going projects. If the employer is in fact already contracted to place the foreign national at a client location, then the contract or a confirming letter from the client should be included with the petition. Obviously, large consulting companies with broad client bases are at a distinct advantage.
The "ability to pay" and "speculative employment" concepts have historically been a regular part of H-1B adjudication at the four service centers. A recent decision of the INS Office of Administrative Appeals, however, criticized these concepts and overturned a service center decision that used them as a basis to deny a consulting company's H-1B petition. "There is no support," the decision states, "for the exploration of this concept [of speculative employment] per se in either statutes or regulations." The "ability to pay" concept was held not to be under the province of the INS, but of the DOL. "Wage determinations and the enforcement of their payment with respect to the H-1B classification are the sole responsibility of the Department of Labor," the decision states. The decision has not been designated as a binding precedent. It remains to be seen what impact, if any, the decision will have, but it might presage relaxation of the standards.
Finally, in still another variation of INS concern over whether an H-1B beneficiary "will" be employed in a specialty occupation, the INS questions petitions where the petitioner is a small enterprise that would not usually need the services, full-time, of a person in the specialty occupation. The INS might suspect, instead, that the person will perform nonspecialized duties, or at best have a hybrid of specialized and nonspecialized duties, and that the petitioner is "inflating" the professional nature of the job description. An example would be a small retail business enterprise of five or fewer employees filing an H-1B petition for an accountant. The INS would question whether that size business needs a professionally trained accountant and, rather, suspect that the person will primarily perform nonprofessional bookkeeping duties. A low salary level would also support such a suspicion.
About The Author
George N. Lester IV is of the Immigration Practice Group (the "Group") of the law firm of Foley, Hoag & Eliot LLP. Foley, Hoag & Eliot LLP is a full-service law firm of 200 lawyers in Boston and Washington, D.C. It was the first large law firm in Boston to develop an expertise in business immigration law, and for over thirty years its Group has represented employers in a full range of procedures to obtain temporary or permanent authorization to employ foreign professionals. Mr. Lester has practiced immigration law for ten years, and regularly speaks to business, academic, and professional groups on immigration topics. As part of his regular AILA activities, Mr. Lester meets with officials of the INS Vermont Service Center to discuss H-1B and other liaison topics. He also serves as Treasurer and a Board Member of the Political Asylum/Immigration Representation Project (PAIR) in Boston, and received that organization's Pro Bono Attorney Award for Dedication and Commitment to Human Rights in May 1996. Mr. Lester is a 1989 graduate of Northeastern University School of Law.
This article is the fifth in a series by George N. Lester of Foley Hoag LLP based on a chapter he authored titled "Specialty Occupation Professionals," in the treatise Business Immigration Law: Strategies for Employing Foreign Nationals, edited by Rodney A. Malpert and Amanda Petersen, and appears here with the permission of the publisher. Published by Law Journal Press. Copyrighted by NLP IP Company. All rights reserved. Copies of the complete work may be ordered from Law Journal Press, Book Fulfillment Department, 105 Madison Avenue, New York, New York 10016 or at www.lawcatalog.com or by calling 800-537-2128, ext. 9300.
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