On April 14, 2016, USCIS officially adopted the Administrative Appeals Office (AAO) decision in the case Matter of Z-A-, Inc. as a policy guidance.

This article examines this new policy memorandum, which addresses the most commonly encountered issues of staffing level in L1A manager petitions, including:

· How many subordinates must an L1 manager have?

· Do overseas workers and contract workers count?

On one level, the memo clarifies that a practitioner can use the supporting staff from qualifying organizations to demonstrate an L1 beneficiary’s managerial duties. On a deeper level, this memo reaffirms the importance of L1 beneficiary’s supporting personnel as one of the most important factors in an L1 functional or personnel manager petition.

Background:

INA §101(a)(15)(L) authorizes intra-company transfer of an executive, managerial, or specialized knowledge employee from a foreign company to a qualifying U.S. company. In practice, many successful L1 cases hinge on the issue of executive or managerial capacity duties, which are defined in INA §101(a)(44)(A) and (B). In practice, USCIS often issues an RFE, especially for small and medium sized companies, based on the number of employees and even denies cases where the company does not seem to have sufficient number of supporting operational or administrative staff who relieve the L1 beneficiary from performing non-managerial or non-executive duties. This practice presents problems for L1 managerial transfer in a small to medium sized international companies that often do not have or need many U.S. employees and rely on foreign staff members to perform certain administrative or operational duties. Additionally, USCIS practice seems to run counter to INA §101(a)(44)(A)(C), which states that USCIS “shall take into account the reasonable needs of the organization, component , or function in light of the overall purpose and stage of development” if staffing levels are used as a factor in determining an executive or managerial capacity.

Who May Be Counted as L1 Beneficiary’s Staff?

By adopting the Matter of Z-A-, Inc., USCIS provides a clear guidance to USCIS officers that they must weigh all relevant factors including evidence of the beneficiary’s role within the wider qualifying international organization when determining management of an essential function.

In the Matter of Z-A-, Inc., USCIS denied an L1 function manager petition that requested transfer of the beneficiary as the Vice President and Chief Operating Officer of the U.S. petitioner, which is a subsidiary of a publicly traded Japanese company with over $900 million in sales, R&D laboratory, seven factories, and nine international subsidiaries. The purpose of the transfer was to oversee the short-term and long-term expansion of the parent company’s products in the new U.S. market. USCIS denied the petition because the petitioner does not have an “organizational structure” to support the beneficiary. The denial referenced two U.S. employees (sales manager and administrative specialist). However, it failed to reference the eight staff members in Japan who exclusively support the beneficiary’s work in the U.S.

Ultimately, the AAO withdrew the USCIS denial and approved the underlying L1 petition because the record demonstrates that beneficiary will manage, rather than perform, the petitioner’s essential function. According to the AAO, the central issue is whether USCIS must consider evidence of personnel employed by another related entity within the qualifying organization who perform day-to-day non-managerial tasks for the petitioning entity. AAO held that an appropriate staffing level analysis must take into account relevant evidence concerning the reasonable needs of the organization as a whole, including any related entities within the qualifying organization, in light of the organization’s overall purpose and stage of development. USCIS’s analysis failed to account for the eight foreign staff members who exclusively support the beneficiary’s work in the U.S.

Therefore, on the most fundamental level, this memo provides clear guidance to interpret “organization” in INA §101(a)(44)(C) to be synonymous with the definition of “qualifying organization” which includes U.S. and foreign entities as defined under 8 C.F.R. § 214.2(l)(1)(ii)(G). Such interpretation makes sense in practice. Today’s transnational businesses are more intricately related and interconnected on multiple levels. It is common for employees to work closely from different offices around the world to minimize duplicative work and maximize operational expertise. It is simply a matter of organizational efficiency and effectiveness.

Who is Supervised is More Important Than How Many Are Supervised

In reality, the term “manager” is used relatively freely, and many positions that have direct dealings or contact with customers often include “manager” in the position title. However, the concept of managerial capacity in an L1 setting is a specific legal term of art and an essential requirement of any L1 petition. In other words, not all managers may be called an L1 manager.

An important analytical question to ask iswhom the L1 manager ultimately supervises. Here, the emphasis is on the quality and the nature of supervision, not simply the number of employees. For example, a manager who oversees four customer service operators will not likely qualify as an L1 manager. In contrast, a manager who supervises four software engineers may qualify. This is in line with INA §101(a)(44)(A) which states that a “first-line supervisor is not considered to be acting in a managerial capacity merely by virtue of the supervisor’s supervisory duties unless the employees supervised are professional.” Therefore, the number itself is not a determining factor. Rather, a careful practitioner must inquire further into the nature of the supervised positions.

Requirements for Newly Established Companies with No Staff

For newly established offices, USCIS does not inquire into the staffing level requirements. In practice, this makes sense because an L1 executive or manager is coming to the U.S. to establish a new office. However, the period of validity for new office L1 petitions is limited to just one year. Therefore, the staffing level inquiry is only relaxed until the first extension petition, at which point, the practitioner must still prove the L1 managerial capacity through direct supervision of employees or through alternative personnel arrangements.

Moreover, even though the newly established company, at the time of applying of the initial new office L1, is not required to have any directly supervised employees, it is still required to prove two aspects of managerial capacity at the time it submits the petition. The first is that the L1 applicant’s position at the overseas qualifying organization must conform to the requirements of the L1 manager. The second is that the newly established company’s business plan must reflect the likelihood that it will support a managerial capacity position that conforms to the L1 requirements within the first year.

What Distinguishes a Function Manager from a Personnel Manager?

The AAO carefully limited the scope of this decision to what evidence may be considered for managerial duties analysis in an L1 function manager petition. It does not provide answers to what constitutes an essential function.

Broadly, the role of a function manager is to primarily manage an essential function within the organization. However, proving that the beneficiary is a function manager is not an easy task. How can a practitioner prove that a function manager with no or very few subordinates is managing an essential function as opposed to performing it? This point has been a point of contention in practice.

Clients often misunderstand that an L1 function manager petition may be approved without any associated employee in the organization. However, a careful analysis of this adopted decision shows that USCIS still examines the applicant’s managerial capacity in light of supporting personnel. It was just that the employees in question were not native, directly supervised U.S. employees, but instead were overseas workers or contract workers. At its core, USCIS denied the initial petition because two U.S. payroll employees were not sufficient to support an L1 function manager who primarily perform managerial duties. The AAO overturned the decision because eight additional foreign staff members at the Japanese headquarters exclusively supported the L1 function manager in the U.S.

The above case highlights the fact that in proving the function manager’s managerial capacity, it is still difficult to prove managerial capacity without addressing the issue of personnel supervision. While the staffing level may not be scrutinized as closely in L1A cases involving function managers as it is in cases involving personnel managers, when the company involved lacks alternative staffing arrangements, such as foreign support staff or independent contractors, it may be difficult to prove that a function manager manages, rather than performs, the essential function. To conclude on the basis of this case that a U.S. company with just three administrative staff can receive an L1 extension would be a costly misunderstanding.

Another way of looking at this is that a function manager cannot direct or manage a company’s essential function in a vacuum. If you are a manager, there is no way to separate yourself from the management of actual people. In telling USCIS not to rely solely on the number of native U.S. workers in adjudicating L1 cases, the policy memorandum is also telling companies that function managers cannot manage in a vacuum.

The new USCIS policy memo provides additional guidance that broadens the type of acceptable evidence that may be considered for an L1 managerial capacity analysis. However, there still remains uncertainty over the issue of an essential function. Practitioners should tread carefully and present evidence of sufficient staffing level, in terms of direct U.S. employees or foreign support staff, who will relieve the beneficiary to manage the company’s essential function rather than perform them.