This memorandum explores the practical question of whether a placement worker can obtain an L1-A visa or EB-1C green card by working for an end client that does business in both the United States and abroad.[1] In today’s complex labor economy, placement firms, contractors, and end-clients must navigate the minefield of U.S. immigration law. The Immigration and Naturalization Service (“INS”) oversees several different types of visa programs. The L-1A Visa, the topic of this memorandum, is reserved for certain managers and executives.[2] This type of Visa plan is available to “employees” of international companies. The INS explains, “managers and executives plan, organize, direct, and control an organization’s major functions and work through other employees to achieve the organization’s goals.”[3] This differs from “first-line supervisors.” The latter are those who “plan, schedule, and supervise the day-to-day work of nonprofessional employees, [but] are not employed in an executive or managerial capacity, even though they may be referred to as managers in their organization.”[4] Thus, when determining whether a person is eligible for an L1-A Visa, the worker’s role in the end-client organization must be examined.
This first consideration is important because much of the current and past case law analyzes whether an employee is in fact a manager or merely a first-line supervisor.[5] Although many placement agency workers do not undertake key executive functions in the end-client’s company, there may be situations where a key player fitting the foregoing definition is needed, and that need is filled by a placement agency. In that case, the client, agency, and contractor/employee must know whether the talent can be placed in a client’s office within the United States. For example, let’s say the “Widget Company” has offices in New York and London, and does business in both cities. Its Vice President of quality in the New York office abruptly resigns. A placement agency, “Quality Employees RUS,” offers to place a skilled quality executive with Widget Company. Can the placement executive obtain an L1-A Visa to work in New York?
Let’s assume the worker meets the definition of an executive. The next question to consider is whether Widget Company is “doing business” in both countries. Doing business in this circumstance means, “the regular, systematic, and continuous provision of goods and/or services by a qualifying organization and does not include the mere presence of an agent or office of the qualifying organization in the United States.”[6] In addition to doing business in the United States, the company must be doing business in some jurisdiction outside the United States.[7] If the company itself does not do business in both spheres, it’s possible to meet this condition if an affiliate or subsidiary does business within and without the United States.[8] However, the INS takes a narrow view on what is considered an affiliate or subsidiary. The INS specifically rejected a proposal to define “affiliate” broadly to include companies with contractual, joint venture or other agreements.[9] Instead, the INS determined that the qualifying entity employing the potential L1-A candidate must be controlled by the entity doing business in the US and abroad.[10]
This interpretation by the INS makes it difficult for an “employee” of the placement agency to obtain an L1-A Visa even if the person meets the INS definition of an executive because the placement agency, presumably, is not controlled by the end client. In other words, the placement agency would not qualify as an eligible employer or as an affiliate of an eligible employer despite having a contract with the end client. On the flip side, the end client might meet the requirements for an eligible employer doing international business, but the placed worker is technically an “employee” of the placement agency, not the end client and the placement agency is typically not controlled by the end client.
In review, the statute states: “An alien must satisfy two requirements to qualify for an extension of his or her visa as an intracompany transferee. An alien must be employed ‘continuously for one year by a firm or corporation or other legal entity … in a capacity that is managerial, executive, or involves specialized knowledge.’”[11]
The above statutory language presents significant barriers to getting a placement employee into the United States on an L1-A visa. Assuming that the worker has been with the end client for one year and meets the definition on an executive, the section on its face relates to “intracompany” transfers. The worker may be transferring through the end client, but not transferring within the placement agency. So, the only way that an L1-A visa can considered in this circumstance is if: 1) the worker has been placed with the client company for at least one year; 2) the client company is international and does business within and without the United States; 3) the client company transfers the worker from a foreign site to a site within the United States; and 4) the worker meets the definition of an employee as applied to the client company. This final hurdle is a difficult one.
In an interesting omission, the INS has not defined “employee” despite using the term extensively throughout the regulations on this issue.[12] When the term “employee” or “employer” is not defined, “Congress intended to describe the conventional master-servant relationship as understood by common-law agency doctrine.”[13] When determining whether one is an “employee” outside statutory guidance, SCOTUS offers the following guideposts:
In determining whether a hired party is an employee under the general common law of agency, we consider the hiring party’s right to control the manner and means by which the product is accomplished. Among the other factors relevant to this inquiry are the skill required; the source of the instrumentalities and tools; the location of the work; the duration of the relationship between the parties; whether the hiring party has the right to assign additional projects to the hired party; the extent of the hired party’s discretion over when and how long to work; the method of payment; the hired party’s role in hiring and paying assistants; whether the work is part of the regular business of the hiring party; whether the hiring party is in business; the provision of employee benefits; and the tax treatment of the hired party.[14]
Thus, the final factor is a case-by-case, fact-sensitive approach. It’s also to some extent at the whim of the INS reviewer. Once the INS makes a decision on a particular application, the courts are very reluctant to overturn it. Denial of a Visa application by the INS is only reversed if there is an abuse of discretion, and “abuse of discretion is shown only if the decision under review was made without a rational explanation, inexplicably departed from established policies, or rested on an impermissible basis such as invidious discrimination against a particular race or group.”[15] This is compounded by a view in the federal courts that these particular types of Visas should be approved in small numbers. The Eastern District of New York court explained, “Congress made it clear that only a small number of applicants would meet the requirements of 8 U.S.C. Section 1101(a) (L) (15), since the statute was to be narrowly drawn.”[16] These narrowly-construed rules and lack of statutory definition place placement workers and their “employers” in a difficult predicament.
The common-law test endorsed by the Supreme Court acts to split the typical placement worker in two. On the one hand, the end client typically exerts a strong amount of control on the worker. The client tells the worker where and when to come to work, sets job descriptions and parameters, assigns its own employees to the worker in the case of managers or executives (as relevant here), requires the worker’s particular skill set, and controls the tools of the trade. On the other hand, the placement agency controls the financial strings. Placement workers are typically paid directly by the placement agency; the agency pays taxes on the worker, and pays for the worker’s mandatory and discretionary benefits. Finally, the agreement between the placement worker and the end client typically goes to great lengths to state that the worker is not an employee of the end client. This is done primary for tax and benefit law purposes or in some cases for regulatory purposes if the employer is small and benefits from certain exemptions. However, in the case of the L1-A Visa, it causes friction with the worker being classified as an “employee” by the INS.
Based on the above analysis, a placement worker could apply for an L1-A visa under the right circumstances. Assuming the end client meets the definition of an international business, the placement worker has been with the for one year, and the worker meets the definition of an executive or manager under the L1-A Visa rules, the end client and placement agency can take some steps to help the employee be classified as eligible for the L1-A Visa by INS standards. The agreement between the end client and the placement agency should soften the language on disclaiming an employer-employee relationship between the end client and the worker. The end client should be given broad control over the scope of the placement worker’s job duties, the working hours, and location. The end client should have the authority to oversee the worker’s quality and determine any specifications that the worker must meet. Finally, the end client could offer some direct fringe benefits or incentive compensation to the worker. Incentive or production pay could help the worker be classified both as an employee and an executive.
Though these are fine strategies to help the worker obtain an L1-A Visa, all parties should keep in mind that the same “employee” test is often used by states and the federal government for classifying workers as either independent contractors or employees. Thus, the more the worker looks like an employee of the end client, the greater the chances are that the worker will be approved for the L1-A Visa, but, the greater the chances are that the worker will be found to have been “mischaracterized” as an employee of the placement agency rather than an employee of the end client for purposes of tax liability and employment claims. This is particularly dangerous in the case of a foreign placement firm because governments have more incentive to collect lost taxes. For example, if the placement agency is located in London and the worker is working in New York, and taxes are being deducted from the employee’s salary in the United Kingdom, New York and the IRS might challenge the status of the worker in an effort to collect taxes from him or her in the United States. Further, workers’ rights organizations like the Department of Labor might challenge the relationship if they believe the worker is not getting the proper benefits, which is less of a problem if the placement agency is located in a Western European country than it is if the placement agency is located in a country with few worker benefit safeguards.
In the end, the end client, placement agency, and worker must weigh their options and goals carefully. They should make a joint business decision on how to structure the agreement and working relationship to obtain the best chance of the worker being approved for an L1-A Visa, if that is the end goal. All parties must also weigh the risk of the worker being rejected or treated as an employee of the end client for tax and benefit purposes. In the future, the industry should ask the INS or Congress to create a workable solution to this issue. In short, for now, it’s a very big risk and unlikely for success.
[1] For the purpose of this discussion, the focus is on the L1-A Visa because its requirements are essentially a prerequisite for the EB-1C green card.
[2] U.S. Citizenship and Immigration Services, Policy Manual, Chapter 3, available at: https://www.uscis.gov/policy-manual/volume-2-part-l-chapter-3
[3] Id.
[4] Id.
[5] See e.g., Fedin Bros. Co., Ltd. v. Sava, 724 F.Supp. 1103, 1106 (E.D. N.Y. 1989); Boyang, Ltd. v. I.N.S., 67 F.3d 305 (9th Cir. 1995).
[6] 8 C.F.R. Sec. 214.2(l) (1) (ii) (H).
[7] 52 Fed.Reg 5741.
[8] See 8 CFR 214.2(l).
[9] 52 Fed.Reg 5742
[10] See Id.
[11] 8 U.S.C. § 1101(a) (15) (L).
[12] See Matter of [Name redacted] (USCIS Administrative Appeals Office, 2007) (SRC 05 002 50459) (acknowledging that there is no definition of the term).
[13] Nationwide Mutual Ins. Co. v. Darden, 503 U.S. 318, 322-323 (1992).
[14] Id.
[15] London Typographers, Inc. v. Sava, 628 F. Supp. 570, 576 (S.D.N.Y.1986).
[16] Fedin Bros. Co., Ltd. v. Sava, 724 F.Supp. 1103, 1106 (E.D. N.Y. 1989).
