USCIS on Use of H1B and EB2 by Entrepreneurs: Part I

Secretary of the U.S. Department of Homeland Security (DHS) Janet Napolitano, and U.S. Citizenship and Immigration Services (USCIS) Director Alejandro Mayorkas recently announced policies intended to allow the utilization of current immigration categories by foreign national entrepreneurs in a more expansive manner. These announcements were made on August 2, 2011, and are part of a presidential pro-entrepreneur, initiative known as Startup America. The USCIS announcement does not create new law – it simply relates to interpretation and opportunities within existing immigration laws that potentially can benefit entrepreneurs, thereby benefitting the United States. In Part I on this topic, we summarize the announcement and related questions and answers (Q&A) as they pertain to the H1B option.

Background: Hurdles for Some Entrepreneurs

As explained in our August 4, 2011 NewsBrief, USCIS Announcement to Encourage Entrepreneurs to the U.S., this development potentially creates options for some entrepreneurs who would not otherwise qualify for immigration categories that are available solely to entrepreneurs. The EB5, investor permanent resident, or “green card,” category historically has been unwieldy and has required investment levels beyond the financial means of many entrepreneurs. The temporary, nonimmigrant treaty trader / treaty investor categories, E-1 and E-2, are not available to nationals of all countries, due to a lack of appropriate treaty between the United States and certain countries.

As explained in more detail below, the announcements make clarifications, establishing in certain instances, the availability to entrepreneurs of the H1B temporary professional worker category, as well as the employment-based, second preference (EB2) category (specifically, the National Interest Waiver). President Barack Obama’s Startup America initiative is not purely an immigration initiative. It is a multi-pronged approach to accelerating the growth of entrepreneurship throughout the United States.

USCIS Revises January 8, 2010 Memo on Employer-Employee Issue

The January 8, 2010 USCIS guidance tightened the long-standing H1B requirement that an employer-employee relationship exists between the H1B petitioning company and the sponsored foreign national worker. The key issue in the employer-employee relationship is control by the employing company. As part of the announcements regarding entrepreneurs, the USCIS revised their Q&As on the USCIS January 8, 2010 Employer-Employee relationship memorandum.

H1B Option: Employer-Employee Relationship Issue

As explained in the August 2, 2011 Q&A revision, it is difficult for a sole owner of an H1B-petitioning company to establish the required employer-employee relationship for H1B purposes. This holds true notwithstanding the fact that corporations are legally separate entities from their stockholders and owners. However, the Q&A states that there are potentially some factual situations in which the petitioning company would have control over the owner or beneficiary. The example given where there is an independent board of directors that has the ability to hire, fire, pay, supervise, or otherwise control the H1B beneficiary.

Analysis: Potential Arguments to Show Control Exists

The Q&A addresses only the situation in which there is sole ownership of the H1B-petitioning company. In many entrepreneurial situations, there may be more than one individual involved with the company at the time of its inception. While control is always important, it may exist when the investor is a minority owner. It would also be possible to argue that control exists when the investor is the majority owner, but owns less than 50 percent and, thus, could be outvoted by other owners.

We at the Murthy Law Firm are receiving many inquiries from entrepreneurs presenting situations beyond the single example of control given in the Q & A. Each situation needs to be reviewed and analyzed, as there may be other factors in a situation that would allow for arguments regarding control. Time will tell as to which approaches are more likely to be successful. It should be noted that, if there are multiple owners, there needs to be a genuine separation between the owners. When ownership is shared by an entrepreneurial married couple, the USCIS is likely to doubt that one of the spouses, in fact, has no control over the company, since spouses generally have some degree of influence on one another.

Potential Unauthorized Employment with Entrepreneurs

Individuals who have their own businesses may need to consider whether their efforts to establish their companies in the United States, and the operation of their companies, constituted unauthorized employment. Those who in the U.S. as nonimmigrants may either lack authorization to work, or may be limited to working for one specific employer-sponsor. When exploring entrepreneurial options based on an existing company, one of the first questions to answer is whether the entrepreneur has worked without authorization and violated U.S. immigration law in connection with starting his/her company. If this has occurred, it is best to obtain qualified immigration advice to understand the risks, prior to taking any further steps.

Overview of Potential Options for Entrepreneurs

Another important consideration in connection with obtaining an H1B as an entrepreneur is how to proceed beyond the H1B from an immigration point of view. Some may have options available to them through their respective spouses, and will have hurdles to overcome when seeking either temporary or permanent residence via this route. Some may determine that requesting a part-time entrepreneurial H1B could be the best option, as a concurrent H1B, alongside the full-time job with another employer that supports efforts toward permanent residence. Still others are the beneficiaries of employment-based permanent residence cases that have progressed to the point where approval is possible through AC21 adjustment-of-status portability and job offers from their own companies. Others, however, must consider whether and how they can possibly obtain permanent residence as entrepreneurs.

In Part II of this article, MurthyDotCom and MurthyBulletin readers will learn about the options set forth in the August 2, 2011 USCIS policy announcement and Q&As related to the topic of employment-based, second preference (EB2) cases, based on a possible NIW filing, for entrepreneurs.

Conclusion

Opinions are mixed as to whether the government’s announcements concerning immigrant entrepreneurs will have a significant, long-term impact on the way filings by and on behalf of such individuals are adjudicated by USCIS. It is believed by some that the USCIS is simply responding to the President’s request, but will not approve cases as there is a lack of trust in the good-faith intentions of the government.

For the time being, it is safest to be cautiously optimistic. We at the Murthy Law Firm are continuing to analyze and explore options for our entrepreneurial clients. Each case presents different opportunities for devising strategies that might meet with USCIS approval. Since there is neither an actual change in the law, nor the creation of a new category for small business owners, however, many entrepreneurs – particularly those in the initial stages of operations – are likely to face immigration challenges.

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