By Xiaojie Marta Meng
In recent years, a growing number of EB-5 investors residing in the United States have begun to show great interest in EB5 direct investment projects. The hope is that by directly managing their own business enterprises, they will not only be able to protect their investments by exercising direct control, but also lay the economic groundwork for their future lives as U.S. immigrants.
EB-5 direct investment cases differ from EB-5 regional center cases and the biggest difference is that during the application process, EB-5 direct investors must create actual direct job positions, namely, form W-2 employees for whom the employer files income tax returns. This is unlike regional center investments, which permit the counting of any indirect job position created based on econometric modeling. The smooth progress of the EB-5 application depends on the EB-5 investor and if the creating direct job positions meet the legal criteria. The requirement is ten positions that need to be at least 35 hours of work weekly and that the positions are filled by qualifying employees.
Exactly what kinds of employees are EB-5 direct investment qualifying employees? Are they limited to green card holders and citizens? In recruiting these kinds of workers, what kinds of issues should the EB5 investor pay close attention?
IN EB-5 DIRECT INVESTMENT CASES, WHO COUNTS AS QUALIFYING EMPLOYEES?
Currently, the many materials available include the United States Citizenship and Immigration Services own presentation manuscripts, all of which only list citizens or permanent residents. However, according to 8 CFR §204.6(e), qualifying employee actually encompasses far more than citizens and permanent residents. The specific provision is as follows:
“Qualifying employee means a United States citizen, a lawfully admitted permanent resident, or other immigrant lawfully authorized to be employed in the United states including, but not limited to, a conditional resident, a temporary resident, an asylee, a refugee, or an alien remaining in the United States under suspension of deportation. This definition does not include the alien entrepreneur, the alien entrepreneur’s spouse, sons, or daughters, or any nonimmigrant alien.”
From the statute, we see that non-immigrants holding short-term visas certainly cannot be counted as EB-5 direct investment qualifying employees. This includes workers who must apply for work visas (H, L, O, etc.) and their family members. Of course, EB-5 companies can still employ these people, but they cannot enter into the company’s EB-5 direct job creation calculation.
In a May 2013 policy memorandum, USCIS laid out the documentary requirements to demonstrate job creation: tax records, form I-9 and other relevant documents. Of all the documents used to prove that the company’s employees are qualifying employees in EB-5 applications, the most looked at is form I-9 – an employment eligibility certification form -- and its supporting materials.
However, form I-9 is not only used to fulfill EB-5 company requirements, it is also used to fulfill the requirements of all companies. The form I-9 regulations were not implemented for the purpose of investigating the immigration status of employees, but rather, to ensure that companies hire employees who are work eligible. In other words, form I-9 only looks at work eligibility and does not look at a person’s specific immigration status. Therefore, recruiting individuals based on the form I-9 does not necessarily guarantee that you will find someone who satisfies the EB-5 qualifying employee requirement for job creation.
So the question is, how should EB-5 investors distinguish job applicants’ immigration status, and through what methods can they find employees who are work eligible?
Some EB-5 investors during a job interview may ask directly: do you have a green card? Are you a citizen? In what status are you now in the United States? However, other EB-5 investors worry that this kind of questioning could place them in violation of the law. So, what kind of practices and questions are lawful and what questions are against the law?
WHAT IS IMMIGRATION-RELATED EMPLOYMENT DISCRIMINATION?
Section 274B of the Immigration and Nationality Act prohibits immigration-based discrimination. Moreover, in U.S. employment law, there are various categories of people specifically covered in anti-discrimination provisions. Employers must refrain from discriminating against any employee or any candidate in the recruitment process on the basis of age, gender, race, disability or other reasons. In U.S. immigration law, there are also related prohibitions on employers discriminating against employees or candidates on the basis of their immigration status or national origin.
Generally speaking, immigration-related discrimination is closely linked with the submission of form I-9. If the employer imposes stricter requirements on employees of a certain status, or the employer’s requirements surpass the legal standards, the employer may be suspected of committing immigration-related discrimination. If the above-mentioned statutory provisions still seem a bit mysterious, the following examples of recently reported company violations can help us understand practically what kinds of behaviors violate the law:
On Nov. 19, 2015, McDonalds reached a settlement agreement with the U.S. Justice Department for immigration-related discriminatory behavior. A civil penalty of $355,000 was imposed and the company was forced to undergo 20 months of monitoring and compensate employees for lost wages based on the facts of each case. The reason was that McDonalds had required employees who were green card holders to present a new green card when the old one expired or risk losing their jobs. McDonalds’ conduct violated the law, as the form I-9 compliance requirements clearly state that green card holding employees only need to provide an unexpired green card initially, after which they do not need to provide a new green card even if the old one expires. Therefore, McDonalds’ conduct constituted discriminatory treatment toward green card employees. In October of 2015, a similar event occurred at the American freight and logistics company Postal Express, Inc.
On Oct. 22, 2015, the Miami-Dade County Public Schools reached a settlement agreement with the U.S. Justice Department for immigration-related discriminatory behavior. A civil penalty of $90,000 was imposed and the company was required to pay employees remuneration of $125,000. The reason was that in implementing its form I-9 procedures, Miami-Dade County Public Schools had demanded some specific documents from immigrants with work permit and those unable to provide them were relieved. According to the form I-9 regulations, the employer is to provide to the employee a list of documents that satisfy the form I-9 requirements and allow the employee themselves to choose the most appropriate proof. The owner’s practice of specifying certain documents was, therefore, an inadvisable one.
On Oct. 20, 2015, Nevada Yellow Cab Corporation reached a settlement agreement with the U.S. Justice Department for immigration-related discriminatory behavior. A civil penalty of $445,000 was imposed and the company was required to place print advertisements in a monthly trade publication for a period of six non-consecutive months advising employees of the anti-discrimination provision of the INA. The reason was that the Yellow Cab Corporation had imposed on immigrants with work permits additional and unnecessary documentary requirements to prove their employment eligibility, which constituted discriminatory treatment.
From the examples above, we can see that during the recruitment process, if you ask directly about the applicant’s immigration status, it will likely be seen as inappropriate. In addition, in implementing the I-9 process, over enforcement toward individuals of a certain immigration status may constitute immigration-based discrimination. Given this situation, then, how should EB-5 employers who want to impose some special requirements for purposes other than proving work eligibility go about doing so? Does the law have exceptions?
IS EB-5 DIRECT INVESTMENT AN EXCEPTION TO THE IMMIGRATION-RELATED DISCRIMINATION PROVISIONS?
Section 274B of the Immigration and Nationality Act lists three kinds of exceptions to the immigration-related discrimination provisions. The following 3 kinds of situations do not constitute a section 274B-type legal violation. They include: a person or other entity that employs three or fewer employees, a person’s or entity’s discrimination is covered under section 703 of the Civil Rights Act of 1964; or discrimination because of citizenship status, which is otherwise required by law, regulation or executive order or required by Federal, State, or local government contract or which the Attorney General determines to be essential for an employer to do business with an agency or department of the Federal, State, or local government.
Among the three exceptions above, the first is certainly not applicable. EB-5 direct investment job creation numbers must be greater than three. The second exception covers employers who have committed larger, more serious violations and is governed by other legislation. Regarding the third exception, some people think it applies to EB-5 cases, but that is not entirely accurate. It is not the case that the EB5 job positions must be filled by employees who have a certain legally mandated immigration status, but rather, it is only that those without this kind of immigration status cannot be counted towards the EB-5 job creation number. This is different from a government contract that actually requires job positions to be filled by persons with a certain immigration status.
In 2011, Justice Department official Katherine A. Baldwin, in an open letter reply to an immigration attorney, issued her own opinion on the issue of how EB5 companies can avoid immigration-related discrimination. She said that when an EB5 company, in demanding additional materials, treats all persons the same regardless of immigration status, then its demand does not constitute immigration-related discrimination. This slightly general opinion does not hold a great deal of significance for the guidance of practical operational details. However, it shows us that EB5 companies can go beyond the general requirements of Form I-9 to require additional materials, so long as the process does not show any kind of partiality toward persons of a particular status, and is not especially stringent.
Although the above cited and discussed EB-5 and immigration discrimination regulations seem to conflict irreconcilably, for EB5 direct investment companies, investors can look for advantageous points. One is the elimination of national origin discrimination and obtaining INA section 274B protection against immigration-related discrimination for all immigrants, but not for non-immigrants. This point has some similarities with the EB-5 qualifying employee provisions. Therefore, if you are a non-immigrant worker, you are not covered under section 274B’s protection against discrimination.
We discussed in the first section of the article that, except non-immigrants, there are many forms of status that are work eligible and all satisfy EB-5 direct investment’s requirement of immigrant status. After consulting an immigration lawyer, perhaps you do not need to risk discrimination and limit recruitment to individuals who are citizens or green card holders.
The ultimate goal of EB-5 investors is to achieve the double prize of immigrating and establishing a business. While ensuring that employees are recruited in compliance with the EB-5 qualifying employee requirement, EB-5 investors must also take care to avoid other legal problems.