June 27, 2022
One of the most common questions we here is “Without an employment authorization, is it okay to incorporate a business? Is it okay to invest a business?”
This article is offered with general advice for public education purpose. For specific advice about your situation, we recommend that you talk to your current attorney or schedule a consultation with aiLegal Law attorneys.
What is “unauthorized employment”?
The term “employment” generally refers to a relationship where an individual provides services or labor and is remunerated for these services. Remuneration can include housing, clothing, food or other benefits. Accepting any kind of remuneration for service can result in a violation of visa status if done without work authorization. The definition of employment for immigration purposes is in the federal regulations at 8 CFR 274a.1(h) as below:
The term employment means any service or labor performed by an employee for an employer within the United States, including service or labor performed on a vessel or aircraft that has arrived in the United States and has been inspected, or otherwise included within the provisions of the Anti-Reflagging Act codified at 46 U.S.C. 8704, but not including duties performed by nonimmigrant crewmen defined in sections 101 (a)(10) and (a)(15)(D) of the Act. However, employment does not include casual employment by individuals who provide domestic service in a private home that is sporadic, irregular or intermittent;
The Immigration and Nationality Act (INA) provides for stiff penalties for those who engage in unauthorized employment. For example, section 245(c) of the INA bars an individual who engaged in or is in engaging in unauthorized employment from being granted adjustment of immigration status.
The Immigration and Nationality Act (INA) provides for stiff penalties for those who engage in unauthorized employment. For example, section 245(c) of the INA bars an individual who engaged in or is in engaging in unauthorized employment from being granted adjustment of immigration status.
Case law study for “self-employment as an investor”
Whether work by a non-immigrant visitor as an “investor-manager” constitutes “unauthorized employment” is an interesting topic. In some cases, for purpose of the bar to adjustment of status in section 245(c)(2) of the Immigration and Nationality Act (INA) or for certain other issues where the definition of “unauthorized employment” may be at issue, the answer may be no.
Matter of Lett, Management of Investment by Qualified Investor Not Considered Unauthorized Employment
The Matter of Lett concerned a nonimmigrant visitor who was found to be deportable (under the-then existing statutory scheme) for having been inadmissible at the time of entry. The respondent in the case filed an I-485 application for adjustment of status in conjunction with an application for determination as an investor before an Immigration Judge. The Immigration Judge in the case denied the motion to reopen because he ruled that the respondent's management of an entity that he had invested in constituted unauthorized employment and, thus, a bar to adjustment of status under section 245(c)(2) of the INA. The Immigration Judge relied on the Board's decision in the Matter of Tong, 16 I&N Dec. 593 (BIA 1978), wherein the Board held that a beneficiary of a family-sponsored (non-immediate relative) petition who had engaged in self-employment without authorization had engaged in unauthorized employment.
However, the Board of Immigration Appeals held in Matter of Lett that the Immigration Judge erred in applying Tong. First, the Board agreed with the respondent that the definition of self-employment without prior authorization is not coextensive with the definition of unauthorized employment. Specifically, the Board explained that the unauthorized employment bar to adjustment of status does not apply to a qualified non-preference investor (under the statutory scheme for non-preference investors at the time). The Board noted that, while an investor found to have engaged in self-employment managing what is determined to be a non-qualifying investment would run the risk of being found to have engaged in unauthorized employment, self-employment managing what is found to be a qualifying investment does not constitute employment. For these reasons, the Board held that the respondent had not engaged in unauthorized employment for managing a qualifying investment.
The Board of Immigration Appeals found that self-employment in connection with managing a qualifying investment is not the same as unauthorized employment
Bhatka v. INS, expanding on the Matter of Lett in the federal court
The Matter of Lett addressed specifically a case where an alien sought preference as an immigrant investor and was found to have made a qualifying investment. In Bhatka v. INS, the Ninth Circuit was tasked with determining whether the Matter of Lett applied to an alien who had been denied status as an immigrant investor but had remained in the United States managing his investment.
The petitioner in Bhatka entered the United States as a nonimmigrant visitor in 1973. The respondent purchased a motel in California shortly after entering and he thereafter operated the motel. The petitioner filed a Motion to Reopen Deportation Proceedings to apply for adjustment of status. However, the motion was denied by the Immigration Judge due to the respondent's having engaged in unauthorized employment as the operator of the motel. The petitioner appealed to the Ninth Circuit after the Board affirmed the Immigration Judge’s decision.
The petitioner argued that his self-employment in managing his motel was not “unauthorized employment” for purpose of the bar to adjustment of status in section 245(c)(2) of the INA. He contended that the unauthorized employment bar is designed only to prevent aliens from filling jobs that would otherwise be filled by U.S. citizens or aliens authorized for employment. The petitioner argued that his self-employment as manager of his own property prevented no such thing, and that he had to the contrary provided employment for several U.S. citizen workers.
The Ninth Circuit agreed with the petitioner's arguments. The Ninth Circuit held ultimately that, because the then-INS had already recognized that investor-managers do not cause the harm to the U.S. job market, management of a business enterprise is not “unauthorized employment” for the purpose of the unauthorized employment bar to adjustment of status under section 245(c) of the INA. Thus, under the precedent of the Ninth Circuit, managing a business enterprise is not unauthorized employment regardless of whether the individual was eligible for immigrant investor status.
Wettasinghe v. INS, Application of Bhatka v. INS to F-1 students
Bhatka was cited in the Sixth Circuit precedent decision in Wettasinghe v. INS, 702 F.2d 641 (6th Cir. 1983). Wettasinghe concerned an F1 student who had purchased a fleet of six ice cream trucks, who stocked the trucks daily, and who drove the trucks only if a driver was unavailable. The petitioner in the case received rental fees from the drivers in addition to a portion of the sales. The issue was whether the petitioner had violated his F1 student status through engaging in unauthorized employment.
The petitioner argued that his conduct was akin to that of an investor and was not unauthorized employment in violation of his F1 student status. In evaluating the claim, the Sixth Circuit assessed Bhatka. Without issuing an opinion on the holding of Bhatka itself, the Sixth Circuit found that Bhatka was not applicable to Wettansinghe for four reasons:
The issue in Wettansinghe was whether the petitioner had violated his student status, not whether he was eligible for adjustment of status, as was the issue in Bhatka;
The purpose of the unauthorized employment prohibition for F1 students is different than the purpose of the bar to adjustment of status;
Regulations explicitly prohibit unauthorized self-employment for students; and
Even if the situation was analogous to that in Bhatka, there was evidence that suggested the petitioner participated in the day-to-day operation of the ice cream truck business and was therefore more than an “investor-manager.”
Conclusion
Despite case law study shows that managing a business enterprise is not unauthorized employment, the self-employment as an investor is in “gray areas” with no clear answer. However, we would like to suggest a few basic principles as below:
Without employment authorization, we suggest you keeping your employment as passive as possible when incorporating or investing a business in the United States. You shall consider hiring managers or employees to run daily operation.
There are many employments authorization options for self-employment as an investor. You can incorporate or invest a business and then file your self-employed H-1B professional employee petition, E-2 investor petition or L-1A multinational manager petition. You may also look for the entrepreneur parole option as well. aiLegal Law has many successful cases in helping self-employed investor in obtaining employment authorization before the USCIS.
Relevant legal products: Employee Job Offer, Employee Non-Disclosure Agreement , Independent Contractor Job Offer
Disclaimer: The above content is published for the public education instead of providing legal advice. Should you have any specific questions, please schedule an attorney consultation with our office here or email us at customer@ailegallaw.com.