Angelo Paparelli on Dysfunctional Government
, 10-15-2012 at 09:03 AM (590 Views)
At least by 1602 with the chartering of the Dutch East India Company, and perhaps as early as the 1300s with the formation of the first colleganza, a rudimentary joint-stock company set up in Venice to share the cost of a trade expedition, human beings and corporations have cohabited the earth.
Although the shared habitation of human and juridical beings has never been entirely peaceful, governments have recognized the countervailing benefits of authorizing associations of people to incorporate fictitious legal entities. When corporate rights are recognized and liabilities limited, governments perceive it more likely that profits will be generated and workers hired than through riskier sole proprietorships and partnerships.
Governments can also control the behavior of companies, as Arizona has done in enacting a statute mandating enrollment in E-Verify, the Department of Homeland Security's employment-eligibility verification database - a law the Supreme Court upheld in U.S. Chamber of Commerce v. Whiting.
To be sure, the legislatively-recognized corporate form at times provides shelter from legal storms while leaving sentient members of the species, homo sapiens, unprotected. For example, the constitutional rights of free association and speech - when applied to corporations - spawn consequences that repulse most ordinary citizens, such as the harmful flood released by the Supreme Court of anonymous corporate donations that fund Super-PAC campaign ads through its ironically titled decision, Citizens United v. Federal Election Commission.
Moreover, when corporations are formed abroad, and profits - though generated through domestic activities - are treated as having been earned outside the United States, federal tax coffers are less full than they otherwise might be. This happens, for example, through the "age-old ruse" of a blind trust (another form of fictive legal entity) when money that might otherwise be subject to U.S. taxation is stashed in a Swiss or Cayman Islands entity, as a certain GOP Presidential candidate who believes that "[c]orporations are people, my friend," perhaps understands quite well.
In the immigration sphere, bureaucrats in the Department of Labor (DOL) and U.S. Citizenship and Immigration Services (USCIS) often refuse to accept the established rule-of-law principle that companies are to be treated as distinct from their individual owners. Although the Obama Administration claims as its official policy enthusiastic support for small-business entrepreneurship, these agencies have adopted regulations or policies at cross purposes that make it nearly impossible for the sole owner of a corporation to qualify through that entity for an employment-based work visa or green card.
The DOL's Tomfoolery. The DOL has enshrined in its regulations requirements protecting the labor certification process from seemingly sinister "[a]lien influence and control over [a] job opportunity." These regulations mandate the submission of evidence envisioned in an administrative law case, Matter of Modular Container Systems, Inc., 89-INA-288 (BALCA 1991). A decision rendered by a panel of civil servants with law degrees known as the Board of Alien Labor Certification Appeals (BALCA), Modular Container Systems made it almost impossible for a corporate entity owned, say 10% or more, by a foreign citizen to sponsor that individual's labor certification application:
We hold . . . that if the alien or close family members have a substantial ownership interest in the sponsoring employer, the burden is on the employer to establish that employment of the alien is not tantamount to self-employment, and therefore a per se bar to labor certification.
BALCA therefore clearly ignored the venerable Anglo-American legal principle that a corporation is distinct from its owners since the panel ruled that the employee of a corporation is not to be treated as such but rather as engaging in activity "tantamount to self-employment."
The DOL regulations, while claiming to accept Modular Container Systems, ignored the corporate form in a different way, namely, by establishing an irrefutable presumption of "bad faith." This proposition holds that no job opportunity could be considered "bona fide" under the labor-certification recruitment process if a foreign citizen sponsored by a corporate employer for a green card (or a family member) holds a material percentage of stock in the corporate sponsor or otherwise could influence the company in determining the qualifications of U.S. citizen job applicants. While this principle may seem logical at first blush, it ignores the other-worldly fictions (as I've shown here, here, here, here, here and there) that are part-and-parcel of the DOL's bass-ackward labor-market testing procedures.
Inherent in the DOL's rule precluding working-owner labor certification is the unproven assumption that an individual shareholder is more likely than a corporate entity to commit fraud. The lengthy list of prominent corporate frauds and other corporate scandals, however, belies the proposition.
USCIS's Three-Card Monty. USCIS, the component within the Department of Homeland Security charged with granting or refusing employment-based immigration benefits, likewise flouts the corporate form whenever it wishes. Yet its misfeasance is worse than that of the DOL.
Rather than publish a proposed regulation and allow an opportunity for public comment, USCIS simply announces novel interpretations of requirements to establish an employer-employee relationship as a prerequisite to approving a work-visa petition. USCIS's out-of-nowhere interpretations flout binding and well-settled legal precedents, Matter of Aphrodite Investments Limited (1980), Matter of Tessel (1980), Matter of Allan Gee, Inc. (1979) and Matter of M-- (1958). These decisions uniformly recognized the distinction between a corporation and its shareholders, thereby allowing a foreign citizen to incorporate a business and legitimately use the entity to sponsor the individual's work visa or green card, activities praised and coveted in the business world as "immigrant entrepreneurship."
USCIS, however, in ostensive deference to the Obama Administration's entrepreneurship initiatives, has claimed to espouse the cause of entrepreneurial job-creation with élan. It has created a much-vaunted "Entrepreneurs in Residence" program, and issued and twice amended an FAQ ("Questions & Answers: USCIS Issues Guidance Memorandum on Establishing the 'Employee-Employer Relationship' in H-1B Petitions") showing how the agency promotes immigrant entrepreneurship. Retreating a tad from its interpretations limiting the recognition of an employer-employee relationship, the agency's FAQ offers an encouraging workaround:
Q12: The memorandum provides an example of when a beneficiary, who is the sole owner of the petitioning company or organization, would not establish a valid employer-employee relationship. Are there any examples of when a beneficiary, who is the sole owner of the petitioning company or organization, may be able to establish a valid employer-employee relationship?
A12. Yes. In footnotes 9 and 10 of the memorandum, USCIS indicates that while a corporation may be a separate legal entity from its stockholders or sole owner, it may be difficult for that corporation to establish the requisite employer-employee relationship for purposes of an H-1B petition. However, if the facts show that the petitioner has the right to control the beneficiary's employment, then a valid employer-employee relationship may be established. For example, if the petitioner provides evidence that there is a separate Board of Directors which has the ability to hire, fire, pay, supervise or otherwise control the beneficiary's employment, the petitioner may be able to establish an employer-employee relationship with the beneficiary. (Emphasis added.)
Unfortunately, an off-message adjudicator at the USCIS California Service Center disputes the concept embraced by the agency's headquarters that the creation of a higher authority with the right of control over the H-1B worker will allow a petitioning corporation to demonstrate that a working owner is in a valid employer-employee relationship with the entity. In this decision, the CSC adjudicator ignored the evidence that a limited liability company (LLC), owned equally by the H-1B beneficiary and another member, was controlled by its managers rather than its members. The adjudicator determined that the members' shared theoretical authority to remove the managers negated an employer-employee relationship.
Ironically, if the entity were a corporation with a board of directors and a sole shareholder as the working owner, USCIS headquarters appears ready, based on the FAQ, to find an employer-employee relationship and approve the H-1B petition, even though a 100% shareholder could fire the board just as easily as sole or joint members of an LLC could remove the managers.
* * *This, sadly, is what happens when immigration bureaucrats create irrebuttable presumptions of bad faith by working owners or float new and unwarranted interpretations that disregard settled law dating back centuries. Corporations - though they are not people - possess enforceable legal rights. Ignoring the distinction between a corporate entity and its owners does nothing to promote the just administration of the immigration laws, hampers job creation and entrepreneurship, and persuades an increasingly cynical public that the agencies make up seat-of-the-pants "law" on the fly.