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As an entrepreneur, one of the key factors to consider is how to get the right people on board to help you grow your business.  Say you just received your second round of financing for your start up that is going to make the world a better place, but in order to embark on this noble and significant endeavor, you need to hire a team of competent software engineers and architects.  These folks need to be as passionate about coding and development as you are about building a world-class company that will take your idea to the next level of innovation and success.

You narrow down your potential hires to one individual who is highly qualified with significant experience in coding and development, that will be the key to translating your brilliant ideas into a tangible product that will WOW the world.  During the interview process, your potential engineer says “As much as I would love to join your company, I want to be honest and upfront, I have two years left in H-1B status and I will need sponsorship for U.S. permanent residence before I would feel comfortable joining your company.” What do you say to that?

The current immigration regulations surrounding the “greencard” or U.S. permanent residence process can be a bit of a challenge for the start up company.  What are the key questions you need to have asked and answered before you say a resounding “Yes, we’d be happy to sponsor you for U.S. permanent residence!”

There are three key questions:

  1. As a company, are you able to pay the “prevailing wage” as determined by the U.S. Department of Labor (USDOL) for the offered position?
  2. Do you have sufficient funds to sustain this salary for next two to three years or longer?
  3. If you’re not planning to pay the government issued prevailing wage currently, do meet the financial tests to demonstrate that your company has the ability to pay the wage?

Are you able to pay the “prevailing wage”?

U.S. employers that sponsor a foreign worker for U.S. permanent residence commonly use the “PERM” application process filed with the U.S. Department of Labor (USDOL).  The employer files an application with the USDOL after testing the U.S. labor market in accordance to specific guidelines, and determines that it cannot find a qualified, willing and able “U.S. worker” to accept the position based on upon minimum education and experience requirements.  This testing of the U.S. labor market is one of the key factors to consider for most greencard applications for foreign workers.  But you also need to consider the ability to pay the prevailing wage as determined by the USDOL.  This is a critical question to answer because current U.S. immigration regulations require that an employer sponsoring a foreign national for U.S. permanent residence under the PERM process, must be either paying the prevailing wage, or have the intent to do so as the time that U.S. permanent residence is granted.

If your start up is made up of angel investors (a.k.a. family and friends) and your revenues are zero, then the saving grace to allow you to still consider sponsorship of a foreign worker for U.S. permanent residence based on the PERM process, is the fact that you are able to pay the foreign worker the “prevailing wage” for the offered position from the get go.  This is a key issue because if the company isn’t paying the government determined prevailing wage or higher, even if the PERM application is approved, you will face an ability to pay hurdle at the immigrant visa petition stage of the greencard process that will affect whether the petition is approved.

Do you have sufficient funds to sustain this salary for next two to three years or longer?

In the unpredictable start up world, one day you are the darling of the technology industry, and the next day, your start up company is yesterday’s news and competitors are developing new technologies that cloud your bright and shiny future. Two of your big investors are not impressed with your progress and now you are looking at: no to low revenues, diminishing investors, and a cash crunch for your payroll.  Well, unlike a U.S. worker, your foreign national worker may not be able to just pick up and leave to join the next big thing.  He/she is looking to you to keep your promise to pay the prevailing wage for the foreseeable future (or at least until she gets her greencard).   If it is unclear what the future may hold and which company may end up taking over your start up baby, and there is significant risk that financing will run out, you are putting your foreign worker in jeopardy if you promise to embark on the greencard process.

If you are not paying the prevailing wage as per the PERM, do meet the financial tests to demonstrate that your company has the ability to pay the wage?

This is clearly a difficult question to answer for most small start ups, but there a handful or more of you out there that have had other successful start ups already, and not only do you have cash in the bank, you also have plenty of people that would invest in your next big thing, and investors who are vying for the opportunity to get on the bus of your next start up.  If this is the case, then pay the offered wage for the PERM application now, and avoid the need to decipher the U.S. tax code to show that you are indeed meeting the financial ability to pay tests. The ability to pay tests are instituted by the U.S. Citizenship and Immigration Services (USCIS) to ferret out those companies who have high hopes but don’t meet the criteria to sponsor a foreign worker for U.S. permanent residence because of ability to pay issues.

In general, the U.S. immigration service uses one of the following three equations in determining the company’s ability to pay:

(1)  Net income – The initial evidence reflects that the company’s net income is equal to or greater than the proffered wage.
(2) Net current assets – The initial evidence reflects that the company’s net current assets are equal to or greater than the proffered wage.
(3) Employment of the beneficiary – The record contains credible verifiable evidence that the petitioner not only is employing the beneficiary but also has paid or currently is paying the proffered wage.

Having the “intent” to pay the wage in the future will not help if your company isn’t earning any income and your net current assets are dismal.  The look back period to determine if an employer had the ability to pay the offered or prevailing wage, whichever is higher, is from the date that the PERM application was filed with the USDOL.

All in all, taking on the responsibility of hiring and sponsoring foreign workers in the U.S. requires good planning and counsel.  After all, a company is often only as good as the people who contribute to it.

Written by Barbara Wong 
SW Law Group, P.C.