On October 1, 2004, the U.S. Citizenship and Immigration Services ("CIS") (f/k/a Immigration and Naturalization Service or "INS") announced that the annual 65,000-person limit ("cap")1 on new H-1B2 cases had already been reached for Fiscal Year 2005 (October 1, 2004-October 1, 2005) and that CIS would not accept any additional H-1B petitions received after the close of business that same day. In other words, on the first day of the new fiscal year, CIS indicated that the cap was already reached for the entire fiscal year (due to early filings submitted in Fiscal Year 2004 after the cap for that year had been reached).
While CIS had warned that the cap would likely be reached shortly after the beginning of the fiscal year, the announcement on the first day of the new year was a shock to immigration lawyers and businesses who did not expect an announcement this soon (and contemplated more warning than CIS provided). Many of us were in the process of finalizing paperwork for clients; with the CIS's announcement, we will not be able to file new cases until April 1, 2005, and the prospective employees will not be eligible to work in H-1B status until October 1, 2005.
Though there has been some discussion in Congress about increasing the annual H-1B cap (at least for employees with masters or higher degrees), we cannot assume in the current political climate that H-1B numbers will be increased. Many Americans - both Republican and Democrat - firmly believe that foreign nationals have taken American jobs and that any initiative to facilitate immigration should be stopped.
H-1B petitions have been used by a huge variety of businesses to hire foreign nationals, because H-1B status is so flexible. While employers with employees in H-1B status have certain additional paperwork requirements and are required to pay their employees the "prevailing wage"3 (in essence, the average wage for the particular type of job in the location of employment), most employers would agree that these additional requirements are not particularly onerous. H-1B status has been essentially available to anyone in a professional occupation for which a bachelor's degree is a prerequisite. While occasionally we filed a case in which CIS denied the H-1B petition, the pass rate has been extremely high and spans a diverse range of businesses.
Now that the H-1B tool is not available (except for extensions of status for existing H-1B employees and for new and existing employees of certain nonprofit organizations and institutes of higher education), employers need to consider the availability of other tools for hiring foreign nationals. While these other tools have always existed, they may have been used less frequently and aggressively when H-1B status was not a problem. This article will discuss in very broad "layman's" terms some of the alternatives to H-1B status that perhaps deserve a second look until more H-1B numbers become available.
TN status.4 The NAFTA treaty created an immigration status known as TN for Canadians and Mexicans in certain designated professions. Those professions span a significant range - from scientists to engineers to actuaries to management consultants. However, this list of professions contains significant gaps; for instance, while a hotel manager is considered an appropriate TN profession, a restaurant manager is not. Many employees prefer H-1B to TN status, when both are available, because of the added flexibility associated with H-1B status. For instance, an H-1B employee is typically provided three years of H-1B status in contrast to a TN employee whose approval is valid for only one year; in addition, H-1B employees are allowed to pursue permanent residency ("green cards") while TN employees cannot. Nevertheless, for Canadians and Mexicans in the designated TN professions, TN status is a welcome and relatively easy to obtain alternative.
L status.5 If L status is available, most practitioners would recommend it over H-1B status in any event. Nevertheless, now more than ever, it should be included in the checklist of alternatives to H-1B status. L status is available to employees who are being transferred to the U.S. employer from an affiliated corporation abroad. The employee must either be working for the company in an executive or management capacity (L-1A) or have "specialized knowledge" of the employer's business (L-1B). The two most fundamental requirements for L status are: (1) the U.S. employer must be a "parent, branch, affiliate, or subsidiary" of the foreign employer; and (2) the employee must have been employed by the affiliated company abroad for at least one continuous year out of the previous three years. Unlike TN status, nationality is irrelevant to L-1 status. Another bonus to L-1 status is that L-2 spouses of individuals in L-1 status are authorized to apply for open market employment.6
E status.7 E status has trickier requirements, but may be an option for supervisory/management employees or employees with specialized knowledge of the employer's business.
There are two types of E visas and they are both nationality-specific. E-1 status is for "treaty traders" and E-2 status is for "treaty investors." To qualify for E status, the prospective employee's nationality must be the same as the employer's nationality. What is a corporation's "nationality"? A corporation's nationality8 is determined by considering the nationality of the individuals who are ultimately its owners. At least 50 percent of the stock must be owned by nationals of the same country. If a company is publicly-held, the government considers the company's nationality to be the location of the exchange where its shares are traded.9
Assuming that the employee and the employer have the same nationality, the next question is whether that particular nationality qualifies for E-1 and/or E-2 status. This determination is based on whether or not a particular type of treaty exists between that country and the U.S. The State Department maintains a list of countries that have such treaties. For instance, treaties are in place between the U.S. and France that would render French nationals eligible for either E-1 or E-2 status. On the other hand, nationals of Greece and Israel are only eligible for E-1 status while nationals of the Czech Republic and Jamaica are only eligible for E-2 status. Nationals of India and the People's Republic of China do not qualify for either E-1 or E-2 status.
Assuming the nationalities match and a treaty exists, an analysis of the E-1 and E-2 requirements becomes necessary. E-1 ("treaty trader") status is available for certain employees of a business that "will be in the United States solely to carry on trade of a substantial nature, which is international in scope." To determine whether such trade is "substantial," the agencies will consider the volume of trade and the monetary value of the trade. Furthermore, the trade must be "principally" between the U.S. and the foreign country for the business to qualify for E-1 status.
In contrast, E-2 visa status may be available to employees of a company that has "invested or is actively in the process of investing a substantial amount of capital in a bona fide enterprise in the United States, as distinct from a relatively small amount of capital in a marginal enterprise solely for the purpose of earning a living." Again, "substantial" is not defined by a particular dollar amount and the regulations state that the determination of what is "substantial" depends on the type of business at issue. The regulations state that, "generally, the lower the cost of the enterprise, the higher, proportionately, the investment must be to be considered a substantial amount of capital." Furthermore, the capital must be "subject to partial or total loss if investment fortunes reverse. Such investment capital must be the investor's unsecured personal business capital or capital secured by personal assets." An informal sliding scale10 is often quoted regarding the amount of any investment that should be at risk. In addition, the business in which the capital is being invested must be "active" - not simply a bank account.
Similar to the spouses of individuals in L-1 status, spouses of individuals in E-1 status are entitled to apply for open market employment.11
J Status.12 A prospective employer might consider the availability of a foreign exchange program (J status) for a prospective employee. Foreign exchange programs are available for, among other things, business trainees. If an exchange program is available and willing to sponsor the trainee, he/she would only be admitted to the U.S. in J-1 status for a maximum of 18 months. Furthermore, depending on the program, the individual may be subject to a requirement to return to his or her home country after the program ended. Also, the alien would need to have the intention of remaining only temporarily in the U.S.; J status is considered incompatible with seeking permanent residency.
Spouses of J-1 exchange visitors may obtain employment authorization if the income is not required to support the J-1 principal alien, but will be used for "recreational and cultural activities."13
H-3 Status.14 Similar to J-1 status in some respects is H-3 status. H-3 status is available to trainees in most fields of endeavor. If an organization wishes to retain a trainee in H-3 visa status, the organization must first show that the proposed training is not available in the alien's own country. Second, the organization would need to demonstrate that the alien would not be placed in a position in which U.S. employees would typically be employed and must not engage "in productive employment" unless secondary to the training. In addition, the organization seeking to sponsor the alien must have a written, established training program in place that provides for a significant amount of in-class training.
National Interest Waiver.15 If the individual to be employed has an extraordinary record of scholarship or research, and the work to be performed will benefit the "national interest" to a greater extent than the work of others in the field, the individual may qualify for a "national interest waiver." This is a waiver from what is typically the first step in obtaining a green card - the labor certification application process. If a person is eligible for this waiver, they can apply for an Employment Authorization Document ("EAD") - essentially a non-employer specific employment authorization. Assuming the application is considered complete based on a preliminary review, the individual is legally entitled to the EAD 90 days from the date of application. This option would only be available in a very small percentage of cases due to the rigorous experience and documentation requirements involved, but, if feasible, would be extremely beneficial to the employee and employer.
This article only explores some of the options to H-1B status - depending on the nature of the job and the employer's business, there could be other possibilities as well. Given today's political climate, this issue will likely remain a concern for the indefinite future. Employers needing to hire foreign nationals should consider these and any other available alternatives in their short- and long-term hiring planning.
18 C.F.R. §214.2(h)(8)(i)(A)(4)
2 8 C.F.R. §214.2(h)(1)(ii)(B)
320 C.F.R. §655.731(a)
48 C.F.R. §214.6
58 C.F.R. §214.2 (l)
68 U.S.C. §1184(c)(2)(E)
78 C.F.R. §214.2 (e)
88 C.F.R. §214.2 (e)(3)(ii)
99 FAM §41.51 N3.2
1056 Fed. Reg. 43567 (Aug. 30, 1991)
118 U.S.C. §1184 (e)(6)
128 C.F.R. §214.2 (j)
138 C.F.R. §214.2 (j)(v)
148 C.F.R. §214.2 (h)(7)
15 8 C.F.R. §204.5 (4)(k)(ii)
Published November 1, 2004.
