Serotte Reich, LLP – Immigration Law

SPECIAL CONSIDERATIONS FOR SMALL BUSINESS EMPLOYERS

An article by William Z. Reich* and Jill A. Apa**

 

This article will discuss the ways in which the new PERM regulations[1] will affect employers with small businesses, particularly organizations with 10 employees or less.  The main discussion of the article will focus on the fact that under PERM, the Department of Labor (DOL) is poised to question the legitimacy of the job opportunity when the application for labor certification involves a small business entity.

The new PERM regulations require specific employer attestations on the new ETA (Employment and Training Administration) Form 9089 in connection with such issues as the number of employees at the organization, whether the foreign worker has an ownership interest in the business, and what, if any, familial relationship exists between the business owner(s) and the foreign worker.  In the past, the DOL may not have questioned the nature of the job opportunity if the application was unremarkable in all aspects and the recruitment period yielded no able, willing or qualified U.S. workers, even if it was filed by a small company.  By contrast, under PERM the DOL will audit all applications submitted by small business employers that tick off a “yes” answer to any of the above mentioned attestations.  These organizations must be prepared to provide any and all documentation, including the evidence specified in the new regulations, to avoid a denial and demonstrate that the job is open and available to U.S. workers.

In addition to these main issues, this article also briefly discusses certain other considerations that may arise in the small business context as we sail into the age of PERM.  Specifically, small business employers must be cognizant of the new stricter prevailing wage requirements, as well as the welcome opportunity to classify foreign workers in one of four wage levels rather than having to grapple with the former, often criticized two-tier wage level system.

Inevitably, small business employers will also ponder the chance to refile pending applications under the PERM regulations.  Certain considerations that may not affect large multi-national companies, including whether additional recruitment will be required and the significant cost of a second recruitment campaign, will be paramount to the small business employer.

Finally, small business employers will likely benefit from the DOL’s decision to include in the final PERM regulations the prospect that the job opportunity may list a combination of occupations and the employer’s ability  to justify this scenario under the pre-PERM “business necessity” standard.

I.                   Rules Relating to Employers With 10 Employees or Less

[1]  General Concerns Over Bona Fides of the Job Opportunity

Under the Immigration and Nationality Act (INA), a foreign worker is not permitted to obtain an immigrant visa or to adjust status to become a lawful permanent resident of the United States unless the Secretary of Labor has first certified that:

(a)    There are not sufficient U.S. workers who are able, willing, qualified and available at the time of the application for a visa and admission into the United States and at the place where the alien is to perform the work; and

(b)    The employment of the alien will not adversely affect the wages and working conditions of similarly employed U.S. workers.[2]

In general, the DOL will not approve an application for labor certification if the foreign worker is self-employed or if the facts demonstrate that a bona fide job opportunity does not actually exist.[3] The legitimacy of the job opportunity is often called into question when a small company is involved and the foreign worker either possesses some ownership or control of the business, or when the foreign worker is related to the business owner(s).  We have already experienced heightened scrutiny by the U.S. Citizenship and Immigration Services in the context of H-1B petitions when the case involves a new or small business entity.  This trend will likely continue under PERM since, under these scenarios, the DOL may find that the employer has not engaged in a good faith effort to find an able, willing, qualified and available U.S. worker to fill the position, but rather, has simply used the company as a way for close family members or invested employees to obtain their green cards.  As such, the burden will be heavier on a small employer to prove that the job opportunity is genuine.

 

[a]  Pre-PERM Standards

The pre-PERM regulations defined the term “employment” as “permanent full-time work by an employee for an employer other than oneself. . . . an investor is not an employee.”[4]  Federal case law, including opinions issued by the Board of Alien Labor Certification Appeals (BALCA) interpreting the term “employment” have held that self-employment cannot be deemed genuine employment under the regulations, and is therefore a per se bar to labor certification.[5]  Thus, if the foreign worker has a substantial enough ownership interest in the petitioning employer to constitute self-employment, the application for labor certification must be denied.[6]

On the other hand, if the foreign worker owns part of the petitioning entity or there is a familial relationship between the business owner(s) and the foreign worker, this may not be viewed as self-employment to trigger the per se bar to labor certification.  However, although the regulations did not automatically preclude an approval in either of these instances, the application for labor certification was open to heightened scrutiny to determine the bona fides of the job opportunity.

In Matter of Modular Container Systems, Inc., the leading opinion on the issue of the existence of a bona fide job opportunity, the BALCA noted:

“Where the alien for whom labor certification is sought is in a position to control hiring decisions or where the alien has such a dominant role in, or close personal relationship with, the sponsoring employer’s business that it would be unlikely that the alien would be replaced by a qualified U.S. applicant, the question arises whether the employer has a bona fide job opportunity.”[7]

The BALCA set forth a “totality of the circumstances” test to determine whether a genuine job opportunity exists when the foreign worker is invested in the company or has some special familial relationship with the owner(s)/investor(s).  The opinion sets forth a number of factors to consider regarding whether the foreign worker:

• Can control or influence hiring decisions regarding the job for which labor certification is sought;

• Is related to the corporate directors, officers, or employees;

• Was an incorporator or founder of the company;

• Has an ownership interest in the company;

• Is involved in the management of the company;

• Is on the board of directors;

• Is one of a small number of employees;

• Has qualifications for the job that are identical to specialized or unusual duties and requirements stated in the application and

• Is so inseparable from the sponsoring employer because of his or her pervasive presence and personal attributes that the employer would be unlikely to continue in operation without the alien.[8]

The BALCA also noted that the totality of the circumstances test must necessarily include a consideration of the petitioning employer’s level of good faith.[9]  Moreover, the facts cannot show that the business was established as a “sham.”[10]  In other words, the business cannot have been created solely to secure permanent residency on behalf of a foreign worker.  This undoubtedly means that the DOL will apply a heightened level of scrutiny to small business petitioners.

 

[b] Post-PERM Rules

[i] Definition of Employment

PERM does not change the traditional rule precluding the approval of an application for labor certification in a case involving self-employment.  The final PERM rule still defines “employment” as “[p]ermanent, full-time work by an employee for an employer other than oneself.”[11]  Additionally, the regulation maintains that with respect to the subject of labor certification “an investor is not an employee. . .”[12]

While maintaining the core meaning of the pre-PERM rules, the new regulations also expand the meaning of the term “employment.”  The PERM regulations specifically instruct the petitioning employer that “[i]n the event of an audit, the employer must be prepared to document the permanent and full-time nature of the position by furnishing position descriptions and payroll records for the job opportunity involved in the Application for Permanent Employment Certification.”[13]

 

[ii] Modular Container Systems Standard Incorporated Into the Regulations

With respect to the issues regarding the bona fides of the job opportunity, the DOL indicated that it will incorporate the totality of the circumstances test outlined in Modular Container Systems, discussed above, directly into the regulations.  Prior to PERM, the DOL may not have questioned the bona fides of the job opportunity if the application was unremarkable in all respects, i.e., nothing beyond the normal minimum requirements listed, and the recruitment efforts yielded few or no applications from qualified U.S. workers.  Now that PERM is a reality, those days are gone.

 

[iii] Questions on the New ETA Form 9089 Regarding Availability of Job Opportunity

Unlike the former ETA Forms 750A & B, the new ETA Form 9089 specifically asks about the foreign worker’s control over the job opportunity.  Question 9 of the new form’s Section C, entitled “Employer Information,” requires a yes or no answer to the query, “Is the employer a closely held corporation, partnership, or sole proprietorship in which the alien has an ownership interest, or is there a familial relationship between the owners, stockholders, partners, corporate officers, incorporators, and the alien?”  Clearly, an affirmative answer may trigger an audit since, under the new filing system, there is no opportunity to submit supporting documents as a preemptive strike against an anticipated  request for further evidence.[14]

Additionally, in that same Section C on the ETA Form 9089, the DOL asks the petitioning employer to provide the number of employees in the area of intended employment as well as the year the business began.  The answers to these questions may also initiate an audit since, as previously discussed, new small businesses may be more scrutinized to ensure against the creation of straw man corporations for the sole purpose of obtaining labor certification for certain employees.

 

[iv] Proving Job Availability

If the DOL begins an audit, the regulations instruct the petitioning employer how to respond to the DOL’s concern over the foreign worker’s influence and control over the job opportunity:

“If the employer is a closely held corporation or partnership in which the alien has an ownership interest, or if there is a familial relationship between the stockholders, corporate officers, incorporators, or partners, and the alien, or if the alien is one of a small number of employees, the employer in the event of an audit must be able to demonstrate the existence of a bona fide job opportunity, i.e., the job is available to all U.S. workers and must provide to the Certifying Officer, the following supporting documentation:

• A copy of the articles of incorporation, partnership agreement, business license or similar documents that establish the business entity;

• A list of all corporate/company officers and shareholders/partners of the corporation/firm/business, their titles and positions in the business’ structure, and a description of the relationships to each other and to the alien beneficiary;

• The financial history of the corporation/company/partnership, including the total investment in the business entity and the amount of investment of each officer, incorporator/partner and the alien beneficiary; and

• The name of the business’ official with primary responsibility for interviewing and hiring applicants for positions within the organization and the name(s) of the business’ official(s) having control or influence over hiring decisions involving the position for which labor certification is sought.

• If the alien is one of 10 or fewer employees, the employer must document any family relationship between the employees and the alien.”[15]

Obviously, this documentation is requested to allow the DOL certifying officer the ability to evaluate the issue further. The supplementary information accompanying the final PERM regulations confirms that the DOL will use the totality of the circumstances test and the non-exhaustive criteria listed in Modular Container Systems to assess the whether a bona fide job opportunity actually exists.  The DOL then goes on to expressly state that no single factor, such as a familial relationship, will be determinative of the issue. [16]

Interestingly, the proposed PERM rule, did not include the number of employees as a factor in the legitimacy of the job opportunity.[17]  Comments submitted in response to the proposed rule indicated that the number of employees should be included since there is an inference that if the foreign worker is one of just a hand-full of employees, the job may not be open to qualified U.S. workers.[18] After considering these comments, the DOL agreed to add the factor into the regulation and to add the specific question regarding number of employees on the new ETA Form 9089.[19]

Based upon the foregoing, it is clear that the final regulations, as well as the structure of the new ETA Form 9089, are intended to immediately call into question the genuineness of a job opportunity when a new small business is involved.  Unfortunately, petitioning employers no longer have the chance to either adopt a wait and see attitude regarding the DOL’s position on each specific case or to submit pertinent documentary evidence up front as a precautionary measure and an effort to avoid an audit.  Without doubt, the small business petitioners have been unavoidably tagged for audits.  As such, these entities are well advised to routinely collect and maintain any and all documentation, including that which is specifically listed in the final regulations, to rebut any presumption that the job opportunity is not bona fide.

 

II.                Other Small Business Considerations 

            [1]        General Prevailing Wage Requirement

 The PERM regulations require an employer to “request a prevailing wage determination from the SWA (state workforce agency) having jurisdiction over the proposed area of intended employment.”[20]  Under the former system, the SWAs conducted the initial review of the ETA 750A & B application for labor certification, along with any supporting documentation filed in conjunction with the forms.[21]  However, even before the final passage of PERM, the DOL terminated the SWA’s powers of review.[22]  In an effort to eliminate the massive backlog of labor certification applications that has existed for many years, the DOL began transferring pending cases to backlog reduction centers located in Dallas and Philadelphia.[23] Likewise, the SWAs will have no part in reviewing cases filed under PERM.  Rather, the SWAs primary function under PERM is to review and issue prevailing wage determinations (PWDs).

The prevailing wage will, in the majority of cases, be determined by the SWA pursuant to the Bureau of Labor Statistics’ occupational employment statistics (OES) program.[24]  The OES program assigns a wage to a particular occupation based on geographic location and level of professionalism.  Under the former labor certification system, the OES divided the levels of professionalism into just two categories based on education, experience and supervisory responsibilities.  In the most simplistic example, the OES assigned the lower Level I wage to an entry level employee, while the agency assigned the higher Level II wage to the employee with experience and significant supervisory duties.

This two-tier wage system had been widely criticized throughout the immigration law community as extremely rigid and unrealistic.  There have been many times where it appeared as though the agency would assign a per se Level II wage depending on the occupation.  For instance, although a first-time CEO could realistically be considered a Level I employee, the DOL would frequently assign the higher Level II wage simply because of the occupation’s nomenclature.

 

[a] New Four Tier Wage Level System

In the wake of years of harsh criticism, Congress finally amended the INA to allow the OES to provide four wage levels, each proportionate to the foreign worker’s education, experience and supervisory responsibilities.[25]  Guidance as to how to apply the new levels is expected to be distributed to the SWAs soon.  Clearly, this increased flexibility in the wage determination system is positive news for petitioning employers, particularly for small businesses since the ability to pay the prevailing wage is often a crucial factor in deciding whether to file a labor certification application.

 

[b] 100 Percent Prevailing Wage Rule       

However, as with most anything, the benefit of this increased flexibility comes with a price.  Until recently the law required employers to pay foreign workers t least 95 percent of the prevailing wage for the job.[26]   No longer.  In late 2004 Congress enacted legislation requiring employers to pay a foreign worker 100 percent of the prevailing wage.[27]

Because the 100 percent rule will now apply, small employers are best advised to spend time reviewing any new wage guidelines made available to the public to carefully draft the PWD request to ensure that the SWA assigns the proper wage level.  The regulations provide for a method to dispute a PWD,[28] but smaller U.S. employers may not have the means, time or ability to fight for a lower wage level.

 

            [2]        The Decision to Refile – Can A Small Business Afford It?

 The PERM regulations provide a mechanism to withdraw pending cases – as long as a withdrawal occurs prior to the placement of a job order – to refile under the PERM system.[29] The petitioner has 210 days from the date of the withdrawal to properly refile under PERM.[30]  The refiled case must comply with all new PERM regulations.[31]

Small business petitioners will have to struggle with whether the decision to refile under the supposedly faster and more streamlined PERM process is financially sound.  With respect to a refiled case, compliance with all PERM regulations means that the petitioning employer must retest the job market for the same job opportunity before filing the ETA 9089.[32]

The general recruitment requirements under PERM include placement of a job order and two Sunday advertisements.[33]  Furthermore, if the job opportunity involves a “professional occupation,” as listed in Appendix A to the PERM rule, the employer must engage in three additional alternative recruitment steps.[34]  These can include an online job listing, an ad in a professional or trade journal, radio and television advertisements, notice at a campus placement office and ads in local and ethnic newspapers.[35]

Undoubtedly, the re-recruitment mandate may impact on whether small business employers can take advantage of the refiling regulations.  Unlike large, multi-national companies, small business employers are much more budget conscious.  Print ads can be extremely costly and with the potential for required additional recruitment steps if the position is for a professional, the small businesses may not be in a position to afford a second campaign.

Several individuals and organizations submitted comments to the DOL expressing concern over the mandate to re-recruit.  The commenters stated that a second recruitment campaign is unduly burdensome and that there is no compelling government interest to support the additional advertising.  The DOL was unmoved: “We do not believe the requirements for refiling cases are burdensome.  Employers are not required to refile existing cases under the new system, so if an employer does not wish to incur the expense of additional recruitment efforts, it need not do so.”[36] With that, many small business employers may be shut out of the refiling opportunities.

 

            [3]        Utilization of a Combination of Occupations

 Despite some of the more negative affects that PERM may have on small business employers, the DOL made one decision apparently intended to help rather than hurt these entities.  The DOL originally proposed to eliminate an employer’s ability to justify a combination of occupations (referred to as a combination of duties under the former regulations) through the demonstration of business necessity.[37]

Surprisingly, the DOL ultimately decided to maintain an employer’s ability to justify the requirement of a combination of occupations through business necessity.  According to the supplementary material published along with the final PERM regulations, several individuals and organizations submitted comments expressing dissatisfaction with the proposed rule.  Many commenters urged that the proposed rule would harm U.S. businesses because we live in a “rapidly changing technological and global marketplace” and the decrease in flexibility to merge occupations will be detrimental.[38] Likewise, another commenter specifically mentioned the impact that the proposed rule would have on small business employers by pointing out that “many small companies expect their employees to ‘multi-task’, and the smaller the company the more likely an employee would perform a combination of duties.” [39]

After consideration of the comments, the DOL incorporated the former standard into the current regulations.  Under PERM, an employer may justify a combination of occupations by proving that it normally employs persons for that combination and/or that workers customarily perform the combination and/or that the combination is based upon a business necessity.[40]  Thus, the decision to maintain the former standard is an unexpected nod to the small business entity.

This is not to say that small businesses will have an easy time satisfying the business necessity test.  Traditionally, in order to justify a combination of duties (now referred to as “occupations” under PERM[41]) as a business necessity, an employer is required to provide documentation to prove “a level of impracticability as to make the employment of two workers infeasible. . . Implicit in this standard is a showing by the employer that reasonable alternatives such as part-time workers, the purchase of new equipment, and a reordering of responsibilities within the organization are infeasible.”[42]  This means taking steps to prove something greater than simply economic or corporate convenience.[43]  Additionally, although the BALCA has refused to adopt an “essentiality test”, it has stated that it is helpful to show that the duties are essential to perform each other. [44]

Although difficult to satisfy, the business necessity test may still prove useful, especially in the small business world.  For example, a boutique design firm specializing in historic building restoration may be able to justify a labor certification filed for a position that requires an individual with skills and education in the field of architecture as well as interior design. Business necessity may require that the architect, who has the primary responsibility of planning and executing a structural remodel may necessarily be required to also recognize and implement critical interior design applications in order to successfully complete the project.

Again, the business necessity test is not an uncomplicated option, but it has thankfully survived the PERM era and will undoubtedly assist many companies in their pursuit of labor certification for essential foreign employees.

 

Conclusion 

No one disputes that the passage of PERM marks a sweeping change to a labor certification system that had been largely condemned among employers, foreign workers and immigration practitioners.  While these changes are intended to create an efficient and streamlined process, many small business employers will be forced to carry a greater burden than their large, multi-national counterparts. Although the surprising retention of the business necessity justification for the use of a combination of occupations is positive, the implications of a system that seemingly automatically targets small business employers for audits may be tremendous.  Similarly, small business employers may be precluded from taking advantage of the regulations that allow for refiling underPERM’s transitional rules.  At this point, all we can do is wait and see the extent to which the newPERM rules swallow the small business employers.