Reproduced with permission. Published April 22, 2021. Copyright 2021 The Bureau of National Affairs, Inc. 800-372-1033. For further use, please visit http://www.bna.com/copyright-permission-request/
The three-week H-1B registration period ended on March 26th. Since then, some H-1B visa hopefuls were delighted to find out they were selected, and many others have learned the disappointing news that an H-1B visa is likely not in the cards for them this coming year.
This H-1B selection process is highly competitive and the uncertainty involved is stressful for everyone involved. It is that much more stressful for foreign founders and shareholders of start-up companies, who face even more hurdles in the H-1B visa process than others do. Although it would seem logical that having an ownership stake in a U.S. start-up company, an objective indicator of the shareholder’s commitment to making his or her company succeed in the U.S. marketplace, should be a positive factor in the eyes of the government, unfortunately, it is seen as a negative factor: something that must be overcome when seeking an H-1B visa. The H-1B rules require that the employer and beneficiary of the visa have an arms-length relationship and the employer must prove that it controls the H-1B visa holder and not vice versa. This disconnect illustrates that the H-1B visa program was not designed with company founders in mind.
Does U.S. Immigration Law Have a Work Visa Designed for Entrepreneurs?
The U.S. does not have a temporary work visa category designed for foreign entrepreneurs. Attempts by Congress over the years to pass start-up visa legislation have all ended in failure. Until Congress amends the immigration law to include a visa that is geared towards start-up founders, foreign entrepreneurs must navigate a patchwork of imperfect immigration options.
We have a temporary work visa called a “Treaty Investor” visa (E-2 visa), but it is only available to citizens of specific countries with which the U.S. has entered into treatiesand it is premised on the concept of foreign direct investment. For this visa to be viable, the U.S. company must at all times be at least 50% owned by the foreign entrepreneur or others who share his or her nationality. As soon as the ownership percentage of the U.S. company drops below 50% foreign ownership, the E visa status becomes void. This automatic voiding of a foreign entrepreneur’s E-2 visa status is a cause of great frustration both to foreign entrepreneurs and their U.S. funders. VC’s must have assurances that the founders they have backed will have the legal right to stay in the U.S. and continue to grow their companies.
What Benefits Does the International Entrepreneur Parole Rule Provide Foreign Entrepreneurs?
One bright light at this time is the International Entrepreneur Parole Rule (“IER”). The IER provides a temporary immigration pathway for foreign entrepreneurs who have founded U.S. companies that have attracted venture capital or other funding, and are likely to grow and add jobs to the U.S. economy, which is a significant public benefit.
“Parole” is not a visa status, but rather a different type of immigration status, that authorizes the beneficiary the right to enter and stay in the U.S., for a specific period of time granted by DHS. While parole status has some drawbacks (i.e. a successful IER parolee may not file an application inside the U.S. to change from IER status to a different immigration status (such as H-1B visa status), it has the distinct advantage for foreign entrepreneurs of being an option that is oriented to the realities of the start-up ecosystem. Applicant have a chance at approval of an IER application if they can show that they (1) founded their start up within three years prior to submitting their application; (2) arewell-positioned to advance the business of the enterprise; ; (3) secured either (a) at least $250,000 in financing from U.S. venture capital or other investors who can prove they have a history of successful start-up investing; or (b) grants of at least $100,000 from Federal, State or local government agencies oriented to economic development, research, and/or job creation. If the application is successful, DHS will grant the applicant parole for an initial period of two years, with an option for a three-year extension if the business continues to grow..
Why Aren’t More People Talking About this Immigration Option for Foreign Entrepreneurs?
The IER rule was promulgated shortly before President Obama left office. Soon after President Trump was inaugurated, his administration tried to remove the regulation and blocked its implementation by delaying the effective date of the rule. The National Venture Capital Association (NVCA) was forced to file a lawsuit in federal court to stop the Trump Administration from improperly blocking the rule, to compel DHS to adjudicate the applications that had been filed by hopeful foreign entrepreneurs. The court ruled in favor of the NVCA. Reluctantly the Trump Administration adjudicated the few applications that had been filed, but it indicated its hostility to the rule by publishing a notice in the Federal Register that it intended to withdraw the rule. Fortunately, the Trump Administration did not carry through on its intention and as of today the rule is still on the books.
Because of the uncertainty over the last four years surrounding the IER rule, this immigration option directly tailored to foreign entrepreneurs never received the publicity it deserves. Foreign start-up founders should take advantage of the IER rule and demonstrate the economic benefits they generate to the local and larger communities in which they operate, grow, recruit and hire. The economic data and metrics generated by these cases (especially, during the renewal requests, when the foreign entrepreneurs must share information with DHS about how their companies have grown and added workers) will be of great interest to the Biden administration and to Congress in considering the benefits of a creating a visa option specifically for foreign entrepreneurs.
We have so few good visa options for foreign job creators – let’s not let this one go to waste.