L-1 Status for Intracompany Transferees
Written by Henry J. Chang
On December 8, 2004, the President signed the FY2005 Omnibus Appropriations Bill, P.L. 108 - 447 (H.R. 4818) into law. The new law contained several immigration-related measures, most notably, reforms to the L-1 and H-1B programs. The section dealing with the L-1 category is referred to as the "L-1 Visa (Intracompany Transferee) Reform Act of 2004" (the "L-1 Reform Act"). Changes imposed by the the L-1 Reform Act are reflected in this article.
The L-1 is a non-immigrant classification that allows foreign companies to temporarily transfer executives and managers ("L-1A") and technical personnel having "specialized knowledge" ("L-1B") to affiliates or subsidiaries in the United States. Executives and managers who qualify for L-1A status are also currently in a position to qualify for permanent residence under the employment-based first preference immigrant category. For a specific discussion of permanent residence for multinational executives and managers, click here.
In order to qualify, the alien must establish that he or she has worked in an executive, managerial or specialized knowledge capacity abroad. The alien must also establish that he or she is entering the United States to work for the same company or a parent, affiliate or subsidiary thereof, in an executive, managerial or specialized knowledge capacity.
Executive, Managerial, or Specialized Knowledge Capacity
The definition of "executive capacity" requires the executive to primarily direct the management of the organization or a major component or function thereof, establish goals or policies relating thereto; exercise wide latitude in discretionary decision-making; and receive only general supervision from higher level executives, the board of directors or the shareholders of the company.
The definition of "managerial capacity" specifically provides that the manager of an essential function need not supervise any other employee in order to be eligible for L-1A classification. However, the manager must primarily perform managerial functions as well as function at a senior level within the organizational hierarchy with respect to the function managed and exercise discretion over the day-to-day operations of the function over which the employee has authority.
A company must establish that it has reached a stage of organizational development and is of such complexity that it can be realistically concluded that the individual seeking transfer is primarily engaged in executive or managerial duties. While staffing levels of the business are not as crucial in determining whether or not an individual is acting in an executive or managerial capacity, they are nevertheless a factor in such a determination. However, the Immigration and Nationality Act ("INA") specifically states that if staffing levels are used as a factor, the reasonable needs of the organization, component or function in light of the overall purpose and stage of development of the organization, component or function must be taken into account.
What little case law there is on the subject suggests that the use of independent contractors performing necessary functions for the small company may be considered in making such a determination. For example, information concerning the use of accountants, brokers, commission sales persons and other contractors not performing auxiliary or clerical duties may be relevant.
"Specialized knowledge" is defined as special knowledge possessed by an individual of the petitioning organization's product, service, research, equipment, techniques, management, or other interests and its application in international markets, or an advanced level of knowledge or expertise in the organization's processes and procedures. There is no need that the knowledge be proprietary.
In addition to the requirement that the individual seeking transfer be currently employed in a managerial, executive or specialized knowledge capacity, the INA requires that the individual have been employed in a full-time capacity for the foreign parent, branch, affiliate or subsidiary for at least one year within the previous three years. The following definitions are relevant:
- "Parent" is defined as a firm, corporation, or other legal entity which has subsidiaries.
- "Branch" is defined as an operating division or office of the same organization housed in a different location.
- "Subsidiary" is defined as a firm, corporation or other legal entity of which a parent owns, directly or indirectly, more than half of the entity and controls the entity; or owns, directly or indirectly, 50% of a 50-50 joint venture and has equal control and veto power over the entity; or owns, directly or indirectly, less than half of the entity, but in fact controls the entity.
- "Affiliate" is defined as:
- One of two subsidiaries both of which are owned by the same parent or individual, or
- One of two legal entities owned and controlled by the same group of individuals, each individual owning and controlling approximately the same share or proportion of each entity, or
- Certain international accounting firms.
United States Citizenship and Immigration Services ("USCIS") [formerly INS], defines the term "qualifying organization" in part as a U.S. or foreign entity which meets the requirements of a parent, branch, subsidiary, or affiliate and is or will be doing business "as an employer in the United States and at least one other country for the duration of the alien's stay in the United States as an intracompany transferee directly or through a parent, branch, subsidiary, or affiliate, and [o]therwise meets the [L-1] requirements … ." This definition requires that the U.S. employer continue to have a related entity doing business abroad. That entity, however, need not be the alien's former employer. There is nothing in the definition to prevent the dissolution or sale of the former employer so long as another affiliate continues to do business abroad.
Required Employment Abroad
As stated above, the alien must have been employed by a related entity abroad for at least one year within the three years prior to the transfer. As a result of H.R. 2278 [PL 107-125], signed into law on January 16, 2002, the one-year period of required employment was previously reduced to six months for L-1 beneficiaries filing under blanket petitions (see below). However, the L-1 Reform Act has since rescinded this provision. As a result, all L-1 aliens (including those filing under blanket petitions) must now have been employed abroad for at least one year.
Employment, De Facto Employment, and Independent Contractors
Working as an independent contractor of the foreign affiliate or subsidiary is generally insufficient for the purposes of satisfying the twelve-month employment requirement. The relationship must be one of employer-employee, although it may be possible to establish this relationship even without formal payroll records. USCIS looks at the degree of control that the company has over the alien to determine if he or she is really a de facto employee or an independent contractor.
In determining whether an individual is an employee, the traditional rule under common law is the "control" test. As established in Kelley v. Southern Pac. Co., 419 U.S. 318, 323-24, 42 L. Ed. 498, 95 S. Ct. 472 (1974), this test applies basic agency principles in determining whether an employment relationship exists.
USCIS has also adopted the control test for the purposes of determining employment in L-1 cases.
In an exchange of correspondence between Yvonne LaFleur, Nonimmigrant Branch, INS Office of Adjudications, and attorney William Reich, File No. HQ 1815-C (Dec 18, 1995), Legacy INS confirmed that the issue of control was the main issue when considering employment for the purposes of L-1 eligibility. In her letter, Ms. LaFleur adopts Matter of Tessel, 17 I. & N. Dec. 631 (BIA 1981) and Matter of Pozzoli, 14 I. & N. Dec. 569 (BIA 1974). In the former case, an unsalaried chairman of a corporation was found to be an employee in a managerial or executive position for Schedule A, Group IV, labor certification purposes. In the latter case, the BIA found that the alien was an employee of the petitioning company notwithstanding the fact that his salary would be paid by the foreign affiliate. Both cases establish that it is the employer's control over the alien, rather than the alien's presence on the employer's payroll, which establishes the existence of the employer-employee relationship.
Even where a foreign company does not have a pre-existing subsidiary or affiliate operating in the United States, it is possible for individuals to be transferred to the United States under L-1 status for the purpose of opening a new office. However, special regulations will apply to persons being transferred as new office L-1's. The most significant of these regulations limit the initial approval period to one year, after which
additional evidence will have to be filed to evidence the U.S. office's need for a managerial or executive employee.
Additional Restrictions Imposed by the L-1 Reform Act
The L-1 Reform Act now prevents an L-1 alien from being primarily stationed at the worksite of another employer in cases where:
Port of Entry Submission of L-1 Petitions Permitted for Canadians
NAFTA permits Canadian citizens to directly apply for L-1 status at a port of entry along the Canada-U.S. border or pre-flight inspection facility at a Canadian airport, as an alternative to filing their petition in the United States. In virtually all cases, submitting an L-1 petition at the port of entry or pre-flight inspection facility is the preferable route.
Blanket petitions permit certain large multinational companies to obtain a blanket L-1 approval for its employees. With an approved blanket petition, the alien may simply apply for an L-1 visa at a consulate abroad and does not need to first obtain a individual petition approval from USCIS. Given the fact that Canadian citizens may directly apply for L-1 status at a port of entry or pre-flight inspection facility (where they will receive an immediate adjudication of their case), blanket petitions are of no benefit to them. However, blanket petitions can still benefit nationals of other countries.
A petitioner may file a blanket petition on behalf of itself and some or all of its branches, subsidiaries, affiliates, or its parent, if the following conditions are met:
- The L-1 alien will be controlled and supervised by an unaffiliated employer, or
- The placement of the L-1 alien at the third party site is part of an arrangement to provide labor for the third party rather than placement at the third party site in connection with the provision of a product or service involving specialized knowledge specific to the petitioning employer.
Blanket petitions may be used by managers, executives, or specialized knowledge professionals. Specialized knowledge workers who are not considered professionals are not permitted to apply pursuant to a blanket petition.
Fraud Prevention Fee Applicable to L-1 Petitions
The L-1 Reform Act imposed a new $500 fraud fee on L-1 petitions. This fee will be in addition to other fees and will apply to employers filing either an initial petition for an L-1 or for a change of status or change of employer petition. A $500 fraud fee will also be charged for an alien filing a visa application abroad for an L blanket petition. The fee will be imposed only on principal aliens, not their dependents. Only petitions that seek to amend or extend the stay of the beneficiary will be exempt from this fee. The effective date of the fraud fee is March 8, 2005.
Duration of L-1 Status
L-1A status is granted initially for three years with extensions of two years being permitted, up to a maximum of seven years. L-1B status is granted initially for three years with an extension of two years being permitted, up to a maximum of five years. After a stay of seven years in the case of L-1A and five years in the case of L-1B, the foreign worker must reside and be physically present outside the United States for at least one year before becoming eligible for L status again. Time spent in H-1B status is also counted against these limits.
Notwithstanding the above, the limits do not apply for aliens who do not reside continually in the United States and whose employment in the United States is seasonal, intermittent, or consists of an aggregate of six months or less per year. In addition, the limits do not apply to aliens who reside abroad and regularly commute to the United States to engage in part-time employment.
Dependents of L-1 Principal Aliens
Dependents of L-1 aliens are given L-2 status. Until recently, L-2 aliens were permitted to attend school but were not able to seek employment. However, on January 16, 2002, President Bush signed H.R. 2278 (PL 107-125) into law. It provides work authorization to the spouses of L nonimmigrants. This eligibility is effective as of the date of enactment. In a memorandum to field offices dated February 22, 2002, Legacy INS explained that the spouse must obtain an employment authorization ("EAD") by filing Form I-765 with the required fee and evidence of his or her relationship to the principal alien before being permitted to work.
Dual Intent Recognized
The concept of dual intent is statutorily recognized for L nonimmigrants. Please refer to the article on dual intent for additional information.
- The petitioner and each of the included entities are engaged in commercial trade or services (non-profit entities are not permitted to file blanket petitions);
- The petitioner has an office in the United States that has been doing business for one year or more;
- The petitioner has three or more domestic and foreign branches, subsidiaries or affiliates;
- The petitioner and the other qualifying organizations have obtained approval of petitions for at least ten "L" managers, executives, or specialized knowledge professionals during the previous twelve months; or have U.S. subsidiaries or affiliates with combined annual sales of at least $25 Million; or have a work force of at least 1,000 employees.