Disclosing an Employee’s Ownership Interest on PERM Applications

The ETA form 9089, application for permanent employment certification (PERM labor certification) asks of employers: “Is the employer a closely held corporation, partnership, or sole proprietorship in which the foreign worker has an ownership interest?” As a variety of business arrangements could exist between employers and employees, the parties to a PERM filing should understand the purpose, scope, and nature of this question, and the potentially severe consequences of failing to answer this question correctly.

Increased Scrutiny When Employee has Ownership Interest

The PERM labor certification requires the disclosure of any ownership interest the foreign worker has in the sponsoring entity to ensure the integrity of the process. The U.S. Department of Labor (DOL) requires such disclosure primarily because the purpose of the PERM process is to protect U.S. workers, and the DOL takes the position that, if the foreign worker has an ownership interest in the sponsoring entity, the company’s recruitment efforts can be rendered suspect. Moreover, the process requires an employer to have a bona fide job opportunity open to U.S. workers, and if a foreign worker’s ownership interest in the sponsoring entity makes the individual irreplaceable, then a bona fide job opportunity may not exist. Finally, the PERM process cannot be used for self-employment, and if a foreign worker’s ownership interest makes the sponsoring entity inseparable from the sponsored employee, then the DOL may consider this to be a form of self-employment.

Definition of Ownership

A foreign worker’s ownership in a sponsoring entity is an issue when the sponsoring entity is a closely held corporation or partnership, or if there are only a small number of employees, which can also apply to a sole proprietorship. Ownership can take various forms, including an employee’s equity stake in the sponsoring employer or ownership of company stock or stock options. Even if a foreign worker’s stocks are sold before filing the form 9089, a foreign worker’s reserved right to repurchase stock options may be problematic.

Impact of Employee’s Ownership Interest on PERM

An employee’s ownership interest in the sponsoring entity is not necessarily fatal to an employer’s PERM filing, but it increases the DOL’s scrutiny of the application. The DOL typically will audit a case when the employer has properly disclosed the employee’s ownership interest on form 9089. To overcome the audit, the employer must establish that there is a bona fide job opportunity for U.S. workers, and that the employee did not have any undue influence in the recruitment process.

Agreements for Future Ownership

An employer may be able to grant an employee future equity in the sponsoring entity that will vest after the employee becomes a lawful permanent resident (i.e., receives a green card). Considering the nuance and complexity of such agreements and the potential impact on the PERM filing, an employer should consult with an experienced immigration attorney prior to entering such an agreement.

Consequences of Failing to Disclose

Failure to disclose an employee’s ownership interest on the PERM labor certification can result in severe consequences. Even if neither the DOL nor the U.S. Citizenship and Immigration Services (USCIS) discovers the undisclosed ownership initially, a later discovery still can significantly impact the employer and the employee and result in a revocation of the approved I-140 petition, a delay in the employee’s green card, or a finding of fraud or of a material misrepresentation by the parties.

Conclusion

The responsibility to disclose an employee’s ownership interest on form 9089 is serious, and failure to disclose an ownership interest could result in severe consequences for the parties. The attorneys at the Murthy Law Firm are available to provide guidance and representation on this issue and on other PERM matters.

 

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Disclaimer: The information provided here is of a general nature and may not apply to any specific or particular circumstance. It is not to be construed as legal advice nor presumed indefinitely up to date.