Obama Administration Looks To Foreign Entrepreneurs For Job Growth

Thursday, September 1, 2011 - 01:00

On August 2, 2011, the Obama Administration unveiled a series of new immigration initiatives to encourage foreign entrepreneurs to remain in the United States and spur job creation through start-ups and investment. Introduced as part of the President's Council on Jobs and Competitiveness, the initiatives offer potentially broader immigration options - both temporary and permanent - for foreign investors, business owners and innovators. In our view, although the new initiatives are a hopeful sign of a more sensible global immigration policy, it remains an open question whether they will be implemented in a positive manner, and thus whether they will have a true meaningful impact on job creation or the ability of foreign entrepreneurs to remain in the United States.

Faster Processing For Executive And Managerial Permanent Residence Petitions

The one new initiative that is likely to have the most immediate impact on businesses is the introduction of 15-day expedited processing for permanent residence petitions filed on behalf of managers and executives who work for multinational companies. This will mean faster green card processing for many foreign business leaders in the United States, which, in turn, should mean a greater willingness of international organizations to transfer senior management to the United States. This, in turn, should spur economic growth (including job development) in the United States.

H-1B Visas For Business Owners

Another initiative is a clarification of the government's policies on whether foreign nationals with an ownership interest in a U.S. business can qualify for the H-1B temporary work visa. Since 2010, U.S. Citizenship and Immigration Services (USCIS) has taken the position that foreign nationals who are self-employed or have an ownership interest in a business may not be eligible for H-1B status, unless it can be shown that there is a separation between the petitioning company and the foreign national, and that the business has the right to control the foreign national's employment. This position was a reversal of a longstanding policy that recognized that a corporation is a separate entity from its owner, even if owned and operated by a single person.

The 2010 policy has proven extremely problematic for many entrepreneurs seeking H-1B status. The new clarification does not reverse USCIS's position. Rather, it states that if the petitioning H-1B employer establishes its right to control the employment of the entrepreneur/beneficiary, H-1B classification may be appropriate even though the H-1B beneficiary holds an ownership interest in the company. In short, it will be necessary for the employer to show that it is not the beneficiary alone who decides the beneficiary's fate, such as where a separate Board of Directors has the ability to hire, fire, pay, supervise or otherwise control the beneficiary.

Entrepreneurs And Permanent Residence

The government has confirmed that entrepreneurs may be eligible for a higher-priority green card classification - the second employment-based preference category (EB-2) for professionals with advanced degrees and foreign nationals of exceptional ability in business, the sciences or the arts. Unlike the standard green card category for professionals and skilled workers (known as the Third Preference, or EB-3 category) and with the exception of two countries currently (India and China), EB-2 sponsored foreign nationals are not subject to lengthy visa backlogs, and even for EB-2 Indians and Chinese, the existing backlogs are much shorter than those in the EB-3 category.

Under existing law, entrepreneurs may also be eligible for a green-card streamlining process known as a National Interest Waiver (NIW), meaning that they may be able to sponsor themselves for EB-2 classification without the need for a job offer and without a certification from the Department of Labor that there are no U.S. workers able, qualified, willing, and available to do the job. To obtain the NIW, applicants must demonstrate that their activities will substantially benefit the national economy, cultural or educational interests or welfare of the United States.Applicants are typically required to show that their employment will be in an area of "substantial intrinsic merit" and that the benefit of their employment will be national in scope. In addition, they must demonstrate that the benefit of their activities in their field will considerably outweigh America's national interest in protecting its labor market through the standard process of labor certification.

Because of these stringent requirements, National Interest Waivers have rarely been granted in recent years. However, USCIS now suggests that an entrepreneur could demonstrate a substantial benefit to the welfare of the United States if his or her business would create job opportunities for U.S. workers or generate economic growth. This is clearly a positive development.

Streamlined Immigrant Investor Procedures

Lastly, the government is planning to streamline the way it administers the EB-5 Immigrant Investor program, a green card program for foreign nationals who invest at least $1 million in a new commercial enterprise or a troubled business that will benefit the U.S. economy and create full-time employment for at least 10 U.S. workers. In recent years, the EB-5 program has been subject to a lengthy adjudication process and a high rate of denials, thus discouraging many legitimate investors. In response, USCIS is proposing reduced processing times for investment projects that are "shovel-ready" and other administrative improvements. However, changes to basic eligibility requirements - including investment and job creation minimums - are not planned.

Are These Changes Real Or Political Fluff?

Initial reactions to the new policies have been mixed. Though the entrepreneur guidelines are a hopeful sign for many foreign business owners, investors and innovators, they fall far short of the strong, substantive changes called for by numerous business advocates and economists. Moreover, they do not appear to be significant advancements in agency policy. Many in the business immigration community had hoped, for instance, that USCIS would distance itself from the restrictive H-1B policies it has imposed on business owners since 2010 and ease the policy restraints it has placed on other immigration programs. Instead, USCIS and the Obama Administration have chosen a more modest path of signaling a willingness to consider entrepreneur applications in the existing immigration framework. Much will depend, therefore, on how USCIS adjudicators treat individual cases - an uncertain proposition at best.

Michael D. Patrick is a Partner at Fragomen, Del Rey, Bernsen & Loewy, LLP, resident in its New York office. He may be contacted via email at mpatrick@fragomen.com. Nancy Morowitz, Counsel at the firm, assisted in the preparation of this column. To learn more about Fragomen, please visit http://www.fragomen.com